Dependent Care FSA Qualifying Individuals
By Brian Gilmore | Published November 3, 2025
Question: With the OBBB increasing the dependent care FSA (DCFSA) limit to $7,500, can you provide a refresher on whose care expenses can be reimbursed through a DCFSA?
Short Answer: Employees can reimburse dependent care expenses through a DCFSA for their qualifying children to age 13, a disabled spouse who lives with the employee for more than half the year, and disabled tax dependents who live with the employee for more than half the year.
Starting Point: The OBBB Increases the Dependent Care FSA Limit to $7,500
Congress set the DCFSA limit at $5,000 in 1986 without indexing it to inflation. With the exception of a one-year Covid-related blip in 2021, the DCFSA remained at that level for 40 years. Among the many benefits-related changes in the new law, the One Big Beautiful Bill Act (OBBB) sets a new $7,500 DCFSA limit ($3,750 for married couples filing separately) starting in 2026.
For more details:
Overview: DCFSA Reimbursable Expenses
There are three main requirements for a care-related expense to be reimbursable under the DCFSA:
The expense must be “employment-related”;
The expense must be to provide “care”; and
The expense must be for a “qualifying individual.”
Employment-Related Requirement: Expenses generally are employment-related if they are for the purpose of enabling the employee (and spouse if married) to be gainfully employed. For details on situations where the employment-related status of dependent care expenses is difficult to determine, see our prior posts:
Provide Care Requirement: Expenses generally are to provide care if the primary function is to assure the individual's well-being and protection. For details on situations where the care status of dependent care expenses is difficult to determine, see our prior posts:
This post focuses on the third required component of an eligible DCFSA expense: The expense must be for a qualifying individual.
General Rule: Dependent Care FSA Qualifying Individuals
The DCFSA rules are set forth in IRC §129. In large part, these rules cross-reference the rules set forth in IRC §21 and its implementing regulations relating to the Child and Dependent Care Tax Credit, which is also expanded/enhanced by the OBBB). In other words, the DCFSA rules piggyback off many of the rules used by individuals to claim the separate tax credit available on the individual income tax return. This is also the case with respect to the definition of a “qualifying individual” (also referred to by the IRS as a “qualifying person”).
These rules set forth the following three categories of “qualifying individuals”:
Children Under Age 13: The employee’s tax dependent qualifying child who is under age 13 when the care is provided;
Disabled Spouse: The employee’s spouse who is not physically or mentally able to care for himself or herself and lives with the employee for more than half the year; and
Disabled Tax Dependent: The employee’s tax dependent who is not physically or mentally able to care for himself or herself and lives with the employee for more than half the year.
Each of these categories of qualifying individuals is discussed in turn below.
Qualifying Individual Category #1: Children Under Age 13
This is the most common qualifying individual for DCFSA expenses because it includes the child daycare/after-school care categories relied upon by so many working parents. To qualify under this category, the child must both a) be a tax dependent under the §152(c) definition of a “qualifying child,” and b) be under age 13.
Qualifying Child Requirement
To meet the “qualifying child” tax dependent test, the child relationship must generally meet the following five requirements:
Child Relationship: The individual’s biological child, adopted child (including legally placed for adoption), stepchild, or foster child (or a sibling, half sibling, stepsibling, or descendant of any of those individuals);
Child Residence: The child must live with the individual for more than half the year (exceptions apply for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents);
Child Age: The child must be under age 19 at the end of the year. If the child is a full-time student for at least five calendar months of the year, the child must be under age 24 at the end of the year (this age test is not relevant for DCFSA purposes because of the age 13 limitation below);
Child Support: The child cannot have provided more than half of his or her own support for the year; and
Child Taxes: The child cannot file a joint return for the year.
Important Notes:
This is just a general overview of qualifying child status, for more details see IRS Publication 501.
Employers should not provide personal income tax advice, and any questions about tax dependent status should be referred to the employee’s personal tax advisor.
Whether a child qualifies of an employee who is divorced, separated, or living apart from the other parent is determined by whether the employee is the “custodial parent,” defined as the parent with whom the child resides for the greater number of nights during the calendar year. For more details, see Dependent Care FSA for Parents Who are Divorced, Separated, or Living Apart.
For DCFSA purposes, the child must also be under age 13 as described below.
Under Age 13 Requirement
It is not sufficient for the employee’s child to meet the tax dependent “qualifying child” test above for the expenses to be for a “qualifying individual” for DCFSA purposes. The qualifying child must also be under age 13 when the care is provided to be a qualifying individual.
In most cases, the employee will have eligible dependent care expenses for the child only for the period of the year prior to the child reaching age 13. The test for having qualifying expenses applies on a day-by-day basis. Employees can therefore incur expenses that are eligible for reimbursement under the DCFSA through the day before the child’s 13th birthday.
Employees who have dependent care expenses for a child in the month of the child’s 13th birthday can submit for reimbursement only for the portion of those expenses incurred prior to the child’s birthday. Any dependent care expenses incurred on or after the day of the child’s 13th birthday are not eligible.
Important Notes:
Employees experience a permitted election change event to revoke the election to contribute to the DCFSA on a prospective basis upon the child reaching age 13. For more details, see Dependent Care FSA Election Changes.
A child may still be a qualifying individual after reaching age 13 if the child is severely disabled to the point of being physically or mentally incapable of self-care, as described in Category #3 below.
Qualifying Individual Category #2: Disabled Spouse
The next category of qualifying individuals is an employee’s disabled spouse who is physically or mentallyincapable of self-care and lives with the employee for more than half the year. The test for whether an individual is incapable of self-care presents a higher bar than a standard disability determination for other purposes, such as for disability benefits.
An individual is considered physically or mentally incapable of self-care only if, as a result of a physical or mental defect, the individual is incapable of caring for his or her hygiene or nutritional needs, or requires the full-time attention of another person for the individual’s own safety or the safety of others. The IRS summarizes this standard as “Persons who can’t dress, clean, or feed themselves because of physical or mental problems.”
Regulations further confirm that the inability of the individual to “perform the normal household functions of a homemaker or care for minor children by reason of a physical or mental condition does not of itself establish that the individual is physically or mentally incapable of self-care.”
Important Notes:
Whether a spouse is incapable of self-care is also relevant for determining whether the employee has employment-related dependent care expenses. The general rule is both the employee and spouse must be working for this purpose, but an exception applies for spouses who are incapable of self-care. For more details, see Dependent Care FSA Issues for Married Couples.
Expenses for a spouse to live full-time at a custodial care facility or nursing home do not qualify because the spouse must live with the employee for more than half the year. Spouses must spend at least eight hours per day in the employee’s household to qualify as living with the employee.
Qualifying Individual Category #3: Disabled Tax Dependent
The third and final category of qualifying individuals is an employee’s disabled tax dependent who is physically or mentally incapable of self-care and lives with the employee for more than half the year.
There are two categories of individuals who may be claimed as a tax dependent:
Qualifying Child; and
Qualifying Relative
Tax Dependent Category #1: Qualifying Child
To meet the “qualifying child” tax dependent test, the child relationship must generally meet the following five requirements:
Child Relationship: The individual’s biological child, adopted child (including legally placed for adoption), stepchild, or foster child (or a sibling, half sibling, stepsibling, or descendant of any of those individuals);
Child Residence: The child must live with the individual for more than half the year (exceptions apply for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents);
Child Age: The child must be under age 19 at the end of the year. If the child is a full-time student for at least five calendar months of the year, the child must be under age 24 at the end of the year. No age limit applies if the child is permanently and totally disabled;
Child Support: The child cannot have provided more than half of his or her own support for the year; and
Child Taxes: The child cannot file a joint return for the year.
Tax Dependent Category #2: Qualifying Relative
To meet the modified “qualifying relative” test for DCFSA purposes, the relationship generally must meet the following requirements:
Not a Qualifying Child: The relative cannot be a qualifying child of any other taxpayer;
Member of Household: The relative must live with the individual all year as a member of the individual’s household (the “same principal place of abode”), except for certain relatives not subject to this residency requirement;
Support Test: The individual must provide more than half of the relative’s total support for the year; and
Citizen/Resident Test: The relative must be a U.S. citizen, U.S. resident alien, U.S. national, or resident of Canada or Mexico.
Important Notes:
This is just a general overview of tax dependent status, for more details see IRS Publication 501.
Employers should not provide personal income tax advice, and any questions about tax dependent status should be referred to the employee’s personal tax advisor.
A spouse is never considered to be a tax dependent of the other spouse.
The §21(b)(1)(B) modification of the definition for DCFSA purposes removes certain requirements from the general qualifying relative definition, including the gross income limitation (which otherwise would require the dependent’s gross income to be less than $5,200 (2025 limit, indexed)).
Incapable of Self-Care Standard
The test for whether an individual is incapable of self-care presents a higher bar than a standard disability determination for other purposes, such as for disability benefits. An individual is considered physically or mentally incapable of self-care only if, as a result of a physical or mental defect, the individual is incapable of caring for his or her hygiene or nutritional needs, or requires the full-time attention of another person for the individual’s own safety or the safety of others. The IRS summarizes this standard as “Persons who can’t dress, clean, or feed themselves because of physical or mental problems.”
Regulations further confirm that the inability of the individual to “perform the normal household functions of a homemaker or care for minor children by reason of a physical or mental condition does not of itself establish that the individual is physically or mentally incapable of self-care.”
Lives With Employee More than Half the Year Standard
Only tax dependents who live more than half the year with the employee can meet this disabled qualifying individual test. Such tax dependents must spend at least eight hours per day in the employee’s household to qualify as living with the employee.
Important Notes:
This third category of qualifying individuals allows the care expenses for a disabled tax dependent child over age 13 to qualify in some cases for DCFSA reimbursement. For more details, see Dependent Care FSA When a Child Reaches Age 13.
This third category of qualifying individuals also allows the care expenses for a disabled tax dependent parent to qualify in some cases for DCFSA reimbursement. For more details, see Dependent Care FSA for Parents.
Expenses for a tax dependent to live full-time at a custodial care facility or nursing home do not qualify because the because the tax dependent must live with the employee for more than half the year.
Determining Eligible Dependent Care FSA Expenses
Ultimately, the determination as to whether the employee’s care expenses for qualifying individual are eligible for reimbursement under the DCFSA is an individual income tax issue to be resolved by the employee. Where in question, employees should consult a personal tax advisor for assistance in determining whether their expenses are eligible for DCFSA reimbursement.
The DCFSA third-party administrator will require the employee to certify that the expenses are eligible for reimbursement upon submitting a claim. Unless the administrator has reason to believe that an expense does not qualify for reimbursement, there will be no further inquiry made by the administrator. The employee is responsible for verifying the eligible expenses on the individual tax return (IRS Forms 1040 and 2441), and if ever raised on audit of the individual tax return by the IRS.
Summary
Now that the OBBB provides employees with the option to increase their dependent care FSA election to $7,500, it is worth revisiting which individuals’ expenses qualify for DCFSA reimbursement. The harsh nature of the Section 125 cafeteria plan use-it-or-lose-it rule for FSAs makes understanding these nuances an important consideration for employees at open enrollment deciding whether to bump their DCFSA election.
There are so many definitions of a “dependent” for employee benefits-related purposes that the relevant definition for purposes of the DCFSA is often confused. In particular, some are unaware of the age 13 limitation for childcare expenses to qualify. Employees also may be unaware that the care expenses for individuals other than children (i.e., disabled spouses and tax dependents) can qualify for DCFSA reimbursement. Employers can direct employees with specific questions to IRS Publication 503 (which, among other IRS resources, summarizes these rules in a manner that is relatively accessible to employees) or to a personal tax adviser.
Relevant Cites:
Treas. Reg. §1.21-1(b):
(b) Qualifying individual.
(1) In general. For taxable years beginning after December 31, 2004, a qualifying individual is—
(i) The taxpayer's dependent (who is a qualifying child within the meaning of section 152) who has not attained age 13;
(ii) The taxpayer's dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B)) who is physically or mentally incapable of self-care and who has the same principal place of abode as the taxpayer for more than one-half of the taxable year; or
(iii) The taxpayer's spouse who is physically or mentally incapable of self-care and who has the same principal place of abode as the taxpayer for more than one-half of the taxable year.
…
(3) Qualification on a daily basis. The status of an individual as a qualifying individual is determined on a daily basis. An individual is not a qualifying individual on the day the status terminates.
(4) Physical or mental incapacity. An individual is physically or mentally incapable of self-care if, as a result of a physical or mental defect, the individual is incapable of caring for the individual's hygiene or nutritional needs, or requires full-time attention of another person for the individual's own safety or the safety of others. The inability of an individual to engage in any substantial gainful activity or to perform the normal household functions of a homemaker or care for minor children by reason of a physical or mental condition does not of itself establish that the individual is physically or mentally incapable of self-care.
IRS Tax Topic No. 602, Child and Dependent Care Credit:
Qualifying individual
A qualifying individual for the child and dependent care credit is:
Your dependent qualifying child who was under age 13 when the care was provided,
Your spouse who was physically or mentally incapable of self-care and lived with you for more than half of the year, or
An individual who was physically or mentally incapable of self-care, lived with you for more than half of the year, and either: (a) was your dependent; or (b) could have been your dependent except that he or she received gross income of $5,050 or more, or filed a joint return, or you (or your spouse, if filing jointly) could have been claimed as a dependent on another taxpayer's 2024 return.
Physically or mentally not able to care for oneself - An individual is physically or mentally incapable of self-care if, as a result of a physical or mental defect, the individual is incapable of caring for his or her hygiene or nutritional needs or requires the full-time attention of another person for the individual's own safety or the safety of others.
Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).
Brian Gilmore
Lead Benefits Counsel, VP, Newfront
Brian Gilmore is the Lead Benefits Counsel at Newfront. He assists clients on a wide variety of employee benefits compliance issues. The primary areas of his practice include ERISA, ACA, COBRA, HIPAA, Section 125 Cafeteria Plans, and 401(k) plans. Brian also presents regularly at trade events and in webinars on current hot topics in employee benefits law.
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