Eligible Dependents

Whose dependent care expenses are eligible?

Per the IRS rules effective 1/1/2005.

You can use your Dependent Care Account to pay for work-related* care for your eligible dependents:

  • Your qualifying child* - under the age of 13
  • Your spouse, or a qualifying child or relative* - who is physically or mentally incapable of self care
* See the tests below to determine if you have a qualifying child or relative.


A qualifying child.
  • Is any of the following: your child, grandchild, stepchild, foster child or adopted child; brother, half-brother or stepbrother; sister, half-sister or stepsister; nephew or niece; or the child or grandchild of any of the relatives listed above
  • Will reside with you for more than half the calendar year

    • Disregard temporary absences due to illness, education, business, vacation, or military service. You must maintain a home for the child during the temporary absence and the child must be expected to return after the absence
  • Will be under the age of 13, or physically or mentally incapable of self care, when the dependent care is provided

    • If the child is 13 or older and physically or mentally incapable of self care, he/she must regularly spend at least 8 hours a day in your home and not file a joint tax return with his/her spouse for the calendar year.
  • Will provide no more than 50% of his/her own support for the calendar year

  • Is a citizen, national or resident of the US; or a resident of Canada or Mexico (unless the child is adopted)

  • And, you are not the qualifying child or relative of any other person

A qualifying relative.
  • Is any of the following: your child, grandchild, stepchild, foster child or adopted child; brother, half-brother or stepbrother; sister, half-sister or stepsister; nephew or niece; the child or grandchild of any of the relatives listed above; your father, grandfather or stepfather; mother, grandmother or stepmother; uncle or aunt; or son-, daughter-, father-, mother-, brother- or sister-in-law. Or, any other person who will reside with you for the entire year (while not in violation of local law).
  • Will reside with you for more than half the year

    • Disregard temporary absences due to illness, education, business, vacation, or military service. You must maintain a home for the person during the temporary absence and the person must be expected to return after the absence.
  • Will regularly spend at least eight hours a day in your home
  • Will not file a joint tax return with his/her spouse for the calendar year (unless the qualifying relative is your spouse)
  • Will not be claimed by any other person as a qualifying child for the calendar year
  • Is a citizen, national or resident of the US; or a resident of Canada or Mexico (unless the person is an adopted child)
  • And, you...

    • Will provide more than 50% of this person's support for the calendar year
    • Are not the qualifying child or relative of any other person.

And, all of the following must be true about the care:

  • The care is provided while you work or to enable you to work. If you are married, the care is provided while your spouse also works or to enable your spouse to work or go to school full-time (at least 5 months a year) or while your spouse is incapable of self care.
  • The care is provided when the dependent meets the definition of a qualifying child or relative (per the IRS, based on a tax year).
  • The care may be provided by a relative or non-relative but is not provided by your child under the age of 19 (tax dependent or not) or another tax dependent.
  • Your care provider conforms to state and local laws (including being licensed, if required) and is able to provide you with his/her Social Security or Tax ID number. You will need this to request a payment or file a claim.
Special Circumstances

Divorced or separated parents: Check with your legal or tax advisor to see if special rules apply to you that would enable your child to be claimed by the non-custodial parent or by both parents.

Tie-breaker: If two or more people want to claim the same child as their qualifying child, the person who has the right to is: (1) the child's parent - if one person is the child's parent and the other is not, (2) the parent with whom the child lives with longest in the year - if both people are the child's parents, (3) the parent with the higher adjusted gross income - if both people are the child's parents and the child lives equally with both during the year, or (4) the person with the higher adjusted gross income - if both people are not the child's parents.


Eligible Expenses

A person is determined to be a qualifying child or a qualifying relative on a daily basis. You can use your Dependent Care Account to pay for eligible dependent care services provided for a qualifying child or relative during your coverage period - as long as the services are provided on days the dependent is a qualifying child or relative.

Example: Your employer's plan year runs from 7/1/2006 to 6/30/2007 and you will be covered for the entire plan year. Your daughter is a qualifying child until her 13th birthday on 3/1/2007, but is not a qualifying child or relative as of 3/1/2007. The dependent care services provided for your daughter between 7/1/2006 and 2/28/2007 are eligible to be paid from your account. The dependent care services provided for your daughter on 3/1/2007 and later are not eligible because she is not a qualifying child or relative at the time the services are provided. The same example applies for a qualifying relative who becomes capable of self care on 3/1/2007. If your employer's plan allows all federally-recognized changes, both events (your daughter's 13th birthday and a person ceasing to be a dependent) are qualified change events that will allow you to decrease your election or cancel your enrollment in the Dependent Care Account.


Disclaimer
Copyright © 2005 and 2006. This information is provided for illustrative purposes only and should not be construed as legal or tax advice. You should consult with a professional advisor regarding your personal situation. The above definitions are effective January 1, 2005 and are the result of recent changes in the tax law, including the Working Families Tax Relief Act (WFTRA) and IRS Notice 2004-79 and the Gulf Opportunity Zone Act of 2005. These tests assume the employer's plan defines dependents with reference to Code 152 (as amended), and may be further changed by law.