Starting in 2026, the One Big Beautiful Bill Act (OBBB Act) raises the annual dependent care flexible spending accounts (FSAs) limit to $7,500 (or $3,750 for married individuals filing separately).
Dependent care assistance programs (DCAPs) let employers offer tax-free dependent care benefits, usually through a pre-tax FSA. Employees contribute, then get reimbursed for eligible expenses like babysitting, child care, or day camp.
Since 1986, the annual contribution limit for dependent care FSAs has been $5,000 ($2,500 if married filing separately). Starting January 1, 2026, the OBBB Act increases the limit to $7,500 ($3,750 if married filing separately).
Action Steps
Employers should take the following steps if they are increasing their contribution limit for their dependent care FSAs:
- Evaluate how the higher limit may affect annual nondiscrimination testing, especially the 55% average benefits test;
- Review and update plan documents as needed; and
- Inform employees of the new limit during open enrollment.
