For many parents of young children, child care represents one of the largest items on their household budget. The average cost of child care was more than $11,500 in 2023, according to an analysis by Child Care Aware, a nationwide network of child care referral agencies. In some high-cost cities, parents are spending more on child care than they are on their rent or mortgage payments.
A dependent care flexible spending account, which most major employers offer as a benefit, is one of the most effective ways to lower your child care costs. A dependent care FSA allows you set aside as much as $5,000 a year in pretax money for a variety of dependent care expenses. Contributions to the account, which are deducted from your paycheck, are exempt from federal income taxes and payroll taxes and may bypass state income taxes as well.
