David Morey 
When most people think about Dependent Care Flexible Spending Accounts, they picture daycare centers, preschool tuition, and summer camps for kids. That’s understandable—child care expenses are what these accounts were originally designed to address, and they remain the primary use case for most participants. But there’s another demographic that desperately needs care, and many people don’t realize that their Dependent Care FSA can help cover those costs: aging parents.
If you’re part of the sandwich generation—simultaneously raising children and caring for elderly parents—you’re juggling an exhausting load of responsibilities and expenses. The good news is that Dependent Care FSAs aren’t just for kids under 13. They can also cover care expenses for adult dependents who are physically or mentally incapable of self-care, including your aging parents. Understanding how to leverage this benefit can save you thousands of dollars annually while ensuring your parents receive the care they need.
The Basics: What Qualifies
Before we dive into strategies, let’s establish what actually qualifies. To use your Dependent Care FSA for an aging parent, several conditions must be met. First, the parent must be your dependent for tax purposes—meaning you provide more than half of their financial support. Second, they must be physically or mentally incapable of self-care. This typically means they cannot dress, clean, or feed themselves, or they cannot be left alone safely due to cognitive impairment like dementia or Alzheimer’s.
Third, and this is crucial, the care expenses must be incurred so that you (and your spouse, if married) can work or look for work. This is the same requirement that applies to child care—the IRS isn’t subsidizing care for your convenience, but rather recognizing that you need someone to provide care while you’re earning income.
The types of care that qualify include adult day care centers, in-home care providers, and even certain respite care expenses. What doesn’t qualify? Medical care, overnight care facilities (nursing homes), or expenses for food, lodging, clothing, or education. The line can sometimes be blurry, which is why working with administrators who understand these nuances is important. Many options, such as Benepass’s FSA offering, include support to help participants navigate these distinctions and ensure they’re using their benefits correctly.
Adult Day Care: The Primary Use Case
Adult day care centers have proliferated in recent years as the population ages and more families seek alternatives to full-time residential care. These centers provide supervision, social activities, meals, and often basic health monitoring during daytime hours—typically from around 7 AM to 6 PM on weekdays.
For many families, adult day care solves multiple problems simultaneously. Your parent gets social interaction, structured activities, and professional supervision. You get peace of mind knowing they’re safe while you’re at work. And critically for our purposes, these expenses are almost always FSA-eligible.
The costs vary significantly by location and services offered, but adult day care typically runs between $70 and $150 per day, or roughly $1,500 to $3,000 per month for five-day-a-week attendance. Over a year, that’s $18,000 to $36,000 in expenses. Since the Dependent Care FSA limit is $5,000 per year ($2,500 if married filing separately), you obviously can’t cover all of it through the FSA—but saving pre-tax on $5,000 of expenses is still meaningful.
At a 30% combined federal and state tax rate, running $5,000 through a Dependent Care FSA saves you $1,500 in taxes. That’s real money that can go toward other care expenses or simply provide some financial breathing room in what’s likely already a tight budget.
In-Home Care: Structuring It Correctly
Many families prefer to keep their aging parents at home and bring in caregivers rather than transporting them to a day care facility. This can work with a Dependent Care FSA, but you need to structure it correctly.
First, you cannot pay family members who live with you or who you claim as dependents themselves. You also can’t pay your own children who are under 19. But you can pay a professional caregiver, whether through an agency or as a household employee.
If you hire someone directly as a household employee, you’re responsible for withholding and paying Social Security and Medicare taxes (the “nanny tax”), and you’ll need to provide them with a W-2. This adds administrative complexity, but it’s legally required and ensures the expenses qualify for the FSA.
Many families opt to work with home care agencies instead, which handle all the employment taxes and paperwork. You pay the agency, they pay the caregiver, and you get a receipt that you can submit to your FSA for reimbursement. This is simpler but typically costs more per hour since the agency takes a cut.
Either way, the key is documentation. You need to be able to prove that the care was provided, when it was provided, and that it was for work-enabling purposes. Keep detailed records of hours worked, dates of service, and what was paid.
Respite Care: Your Lifeline
Here’s something many caregivers don’t know: respite care can potentially qualify for your Dependent Care FSA if it’s structured correctly. Respite care refers to temporary care that gives family caregivers a break—whether that’s a few hours, a full day, or even a weekend.
The qualification depends on the timing. If you’re using respite care so you can go to work, it’s FSA-eligible. If you’re using it so you can take a vacation or simply rest while not working, it’s not eligible. The IRS is strict about this: the care must enable work.
In practice, this means that respite care on your regular work days clearly qualifies. If you typically provide care for your parent during evenings and weekends but need someone to cover during your work hours when your usual caregiver is unavailable, that’s FSA-eligible. Using respite care on a Saturday so you can attend a wedding? Not eligible.
Some families navigate this by using respite care strategically. If you’re able to work from home but finding it impossible to be productive while also managing your parent’s care, bringing in a respite caregiver during your work hours makes that time FSA-eligible. This can be particularly valuable for remote workers who might otherwise feel they should be able to “make it work” without paid help.
The Documentation Challenge
One of the biggest obstacles to successfully using a Dependent Care FSA for elder care is documentation. With child care, it’s straightforward—you have an invoice from the daycare center or a receipt from your nanny. With elder care, especially in-home situations, the documentation can be less formal.
You need to establish proper documentation practices from the start. This means:
- Written agreements with caregivers specifying rates, schedules, and services
- Detailed invoices or receipts for every payment
- A log of dates and hours of care provided
- Clear notation that the care was provided during your work hours
- Tax documents (W-2s for household employees, or the provider’s tax ID)
Many FSA claims for elder care are initially denied simply because the documentation isn’t sufficient. Don’t let this discourage you—appeal with better documentation. Take the time upfront to establish systems that generate the paperwork you’ll need.
Combining Strategies for Maximum Benefit
The most sophisticated approach combines multiple care options to maximize both the quality of care and the tax benefits. Consider this strategy:
Use adult day care as your primary solution for weekdays when you’re at work. This gets your parent social interaction and structured activities while clearly qualifying for FSA reimbursement. Supplement with in-home care for days when the day care center is closed but you’re still working—holidays, the parent’s sick days, or occasional remote work days.
Add respite care strategically when your regular arrangements fall through or during particularly demanding work periods. By diversifying your care approach, you ensure better continuity of care for your parent while also creating multiple streams of FSA-eligible expenses.
The $5,000 Limit Problem
Let’s address the elephant in the room: the $5,000 annual limit is absurdly inadequate for most families dealing with elder care expenses. This limit was set in 1986 and hasn’t been adjusted for inflation since. If it had kept pace with inflation, it would be over $13,000 today.
The reality is that elder care costs have risen even faster than general inflation. What cost $5,000 in 1986 might cost $30,000 or more today. So while the FSA provides valuable tax savings, it’s covering only a fraction of most families’ actual expenses.
This is why it’s important to layer your financial strategies. Use the Dependent Care FSA up to the limit for the tax savings, but also investigate whether your parent qualifies for Medicaid assistance, veteran’s benefits, long-term care insurance, or other programs. Look into whether they can claim medical expense deductions on their own tax return for costs that don’t qualify for your FSA.
Planning Ahead
If you see elder care needs on the horizon—perhaps your parent is starting to struggle with daily activities but isn’t there yet—start planning now. Consider:
Getting a formal assessment of your parent’s care needs from a geriatric care manager. This creates documentation of their inability to self-care, which you’ll need for the FSA.
Researching adult day care options in your area now, before you need them urgently. Many have waiting lists, and quality varies dramatically.
Establishing a relationship with a home care agency so you’re not scrambling to find reliable caregivers in a crisis.
Talking to your parent about accepting help—this can be the hardest part. Many elderly people resist admitting they need assistance. Starting these conversations early, while the needs are still modest, makes the transition easier.
The Emotional Return on Investment
Yes, we’ve been focused on the financial aspects—the tax savings, the documentation requirements, the strategic expense management. But there’s another return on investment that’s impossible to quantify: your own wellbeing and your parent’s quality of life.
Caregiver burnout is real and devastating. If you’re trying to work full-time while also providing hands-on care for an aging parent, something has to give. Usually, it’s your health, your career, your other relationships, or all of the above. Using your Dependent Care FSA to pay for professional care isn’t just a tax strategy—it’s a sustainability strategy that allows you to be a better caregiver, employee, and person.
Your parent benefits too. Professional caregivers bring expertise you may lack. Adult day care centers provide social opportunities your parent might not otherwise have. Getting appropriate care isn’t about warehousing your loved one—it’s about ensuring they have the best possible quality of life while you maintain your ability to support them financially and emotionally for the long haul.
Taking Action
If you’re currently caring for an aging parent and not using your Dependent Care FSA, look into whether you’re eligible. Talk to your benefits administrator about documentation requirements. Start getting your paperwork in order—provider tax IDs, receipts, schedules.
If you’re not yet dealing with elder care but see it coming, include it in your benefits planning for next year’s open enrollment. Estimate your expected expenses and contribute accordingly. Remember, Dependent Care FSAs don’t allow rollovers—it’s use it or lose it—so conservative estimates are wise.
And if you’re an employer reading this, consider how you’re communicating about Dependent Care FSAs. Most of your employees probably don’t know they can use them for elder care. A simple educational campaign could dramatically increase participation and provide real financial relief to employees who are struggling with caregiving responsibilities.
The Dependent Care FSA isn’t a complete solution to the elder care crisis, but it’s a tool worth using. Every dollar you can run through it pre-tax is a dollar that goes further in providing the care your parent needs while you continue building the career that makes all of it possible.
