Dependent Care Assistance Programs: Ineligible Expenses

A dependent care assistance program (DCAP) can only reimburse expenses for the care of a qualifying individual that allow the employee — and a spouse, if married — to work or look for work. Payments to the employee's own dependents or to their child under 19, school tuition from kindergarten up, overnight camp, babysitting for social outings, and premiums for other benefits are all ineligible. Starting in 2026, the annual DCAP exclusion is $7,500 per household ($3,750 for married individuals filing separately).

The Test Every Expense Has to Pass

Most ineligible-expense questions resolve once you apply the two basic conditions of the program.

• The care is for a qualifying individual. That generally means a dependent child under age 13, or a spouse or dependent who is physically or mentally unable to care for themselves and lives with the employee for more than half the year.
• The care is work-related. Its purpose must be to let the employee (and spouse) work, look for work, or — for a spouse — attend school full-time or be unable to care for themselves. Care provided while the employee is not working generally does not qualify.

An expense that fails either condition is ineligible, whatever the provider calls it.

Ineligible Expenses

Payments to certain family members

A DCAP cannot reimburse payments to:

• A person the employee (or spouse) can claim as a dependent, of any age.
• The employee's child who is under age 19 at the end of the year, even if that child is not a dependent.
• The employee's spouse.
• The parent of the qualifying child, where the child is under 13.

Other relatives — a grandparent who is not a dependent, for example — can be paid through the DCAP if the other conditions are met. The provider then must be identified by name, address and taxpayer identification number like any other provider.

Education costs

Tuition for kindergarten and higher grades is an education expense, not dependent care, and is ineligible. Summer school and tutoring fall on the same side of the line. Preschool and similar programs for children below kindergarten level are generally treated as care and can qualify. Before- and after-school care for a child under 13 can qualify because its purpose is supervision while the parent works.

Overnight camps

The cost of an overnight camp is ineligible, even when the camp runs while the employee is at work. A day camp, including a specialty day camp, can qualify.

Care that is not work-related

• Babysitting so the employee can attend a social event, go on a date, or run personal errands.
• Care during an extended period when the employee is not working, such as a long vacation or unpaid leave. A short, temporary absence — a day or two out sick, for example — generally does not disqualify care the employee has to pay for anyway.
• Care while a spouse who does not work, is not looking for work, is not a full-time student and is not incapable of self-care is at home.

Household work unrelated to care

If a caregiver does work that has nothing to do with the qualifying individual's well-being — painting a room, doing yard work, or similar chores — that part of the cost is ineligible. Keep the line clear in any arrangement with an in-home provider.

Other benefits and insurance

DCAP funds cannot pay for other benefits. That includes health FSA expenses, group health premiums, individual health policies, life insurance and disability insurance. Medical care for a dependent is a health expense, not dependent care.

Care for a child who has turned 13

Eligibility for a child ends on their 13th birthday unless they are incapable of self-care. Only care provided before the birthday is reimbursable, so plans should prorate when a birthday falls mid-period.

Expenses not yet incurred

A DCAP reimburses care after it is provided. A payment made in advance for next month's care cannot be reimbursed until the care has actually taken place, and a deposit for care that never occurs is not reimbursable.

Expenses That Commonly Cause Confusion

Where an expense sits in a gray area, the plan document and the IRS rules for dependent care control, not the provider's invoice description. Medical costs for a dependent belong in the health care FSA, not the DCAP.

Limits and Plan Rules That Interact With Eligibility

• Annual limit. From 2026 the exclusion is $7,500 per household, or $3,750 for married individuals filing separately. The limit applies per household, not per employee, so two working spouses with separate DCAPs share it. Reimbursements above the limit are taxable income.
• Earned income limit. The exclusion cannot exceed the lower-earning spouse's earned income.
• Use-it-or-lose-it. DCAP balances are forfeited if not used. A plan may adopt a grace period of up to two and a half months after the plan year ends, but the health FSA carryover option does not apply to dependent care.
• No double benefit. Expenses reimbursed by the DCAP cannot also be claimed for the child and dependent care tax credit.
• The program must pass its own nondiscrimination tests, which can reduce what highly compensated employees can elect.

Administering Denials Well

Most DCAP complaints come from employees who learn an expense is ineligible after they have already paid it. Communicate the exclusions at open enrollment, not just in the plan document, and give specific examples — camp and kindergarten tuition are the two that surprise people most. When a claim is denied, state which rule it fails and what documentation would change the outcome.

Frequently Asked Questions

Can a grandparent be paid through a DCAP?

Yes, if the grandparent is not the employee's dependent and the care is work-related. The grandparent's identifying information must be provided.

Is summer camp an eligible DCAP expense?

Day camp is generally eligible. Overnight camp is not.

Can DCAP pay for kindergarten?

No. Kindergarten and higher-grade tuition is an education expense. Before- and after-school care can still qualify.

What is the 2026 DCAP limit?

$7,500 per household, or $3,750 for married individuals filing separately.

Can unused DCAP funds carry over?

No. A plan may offer a grace period, but carryover is not available for dependent care.

Related Reading and Training

For the program as a whole, see the DCAP explained, and for mid-year election changes see permissible status changes in a cafeteria plan. How to avoid cafeteria plan claim denials covers the administrative side. The Cafeteria Plan training and certification program covers DCAPs, health FSAs and Section 125 compliance in depth.