Dependent Care FSA Maximum Will Be Raised in 2026

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.