Dependent Care Benefits

11-20-2024Tax Information

Dependent Care Assistance Programs (DCAPs) are employer-sponsored benefits that help employees manage expenses associated with caring for qualified dependents. These programs either provide dependent care services directly or reimburse employees for eligible expenses.

For the 2024 tax year, the maximum exclusion from wages for a DCAP remains at $5,000 ($2,500 if married filing separately).

Contributions up to that $5,000 limit, DCAP contributions are exempt from:

• FICA (Social Security and Medicare)
• Federal withholding
• State withholding (taxable in Pennsylvania)
• Local withholding (taxable for purposes of PA earned income, local services and the Pittsburgh payroll taxes)
• Federal unemployment
• State unemployment

Up to $5,000 of the value of DCAP is reported in Box 10 of Form W-2, Wage and Tax Statement. Any amounts that exceed $5,000 must be reported as wages in Box 1, 3, and 5.