Effective for taxable years beginning after 2025, the One Big Beautiful Bill Act (OBBB Act) increases the maximum annual contribution limit for dependent care flexible spending accounts (FSAs) to $7,500 (or $3,750 for married individuals filing separate tax returns).
As background, employers can provide dependent care benefits for their employees on a tax-free basis, subject to a maximum annual limit. These programs are also known as dependent care assistance programs (or DCAPs). Most dependent care FSAs are structured so that employees make contributions on a pre-tax basis through a Section 125 cafeteria plan. When employees incur eligible dependent care expenses, such as expenses for babysitting, childcare or day camp, they can seek
reimbursement from their dependent care FSA.
