Dependent care FSA limit 2026: $7,500, and what employers must do

The 2026 dependent care FSA limit is $7,500, up from $5,000. Here is how it works for families, and what employers must do to offer it.

Vishant Mehta, CPA, Ex-Big 4

Published October 10, 2026

employee benefits
dependent care FSA
section 129
cafeteria plans
open enrollment

The dependent care FSA limit for 2026 is $7,500 a year per tax return, or $3,750 for a married person filing separately. It had been $5,000 since the 1980s, apart from 2021. The 2025 tax law (Public Law 119-21, the One Big Beautiful Bill Act) raised it with no end date.

The higher limit is optional for employers. If your plan document still says $5,000, amend it before the 2027 plan year starts to offer more. The plan's 55% test also gets harder to pass at $7,500.

Limit for 2026	$7,500 per return
Married filing separately	$3,750
Limit for 2025	$5,000
Set by	Section 129, as amended by Public Law 119-21
Indexed for inflation	No
Limit for 2027	$7,500, unless Congress changes it
Status on October 9, 2026	Testing rules proposed, not final

What is the dependent care FSA limit for 2026?

It is $7,500 for care provided in 2026, and the cap applies per return, not per child. A married couple filing jointly shares one $7,500 limit.

The exclusion also cannot exceed your earned income or, if you are married, your spouse's, whichever is lower. A spouse who is a full-time student, or cannot care for themselves, counts as earning $250 a month. With two or more people in care, it is $500.

There is no income ceiling to join a plan, though pay matters for the plan's tests. Up to the limit, the benefit is free of income tax and FICA.

It pays for the care of a child under 13, or of a spouse or dependent who cannot care for themselves, so you can work. Overnight camp does not count.

What are the FSA limits for 2026 according to the IRS?

The IRS publishes two separate FSA limits for 2026, and an employee can use both.

Dependent care FSA. $7,500 per return ($3,750 married filing separately), fixed in the tax code.
Health FSA. $3,400 of salary reduction, with up to $680 carried over if the plan allows. The IRS adjusts it for inflation each year.

Will the dependent care FSA limit increase in 2027?

The limit stays at $7,500 in 2027 unless Congress changes the law. Section 129 has no inflation adjustment, so the IRS's yearly figures cannot move it.

Can both parents contribute to a dependent care FSA?

Yes, both parents can enroll through their own employers, but a couple filing jointly can exclude only $7,500 in total. Before 2026, that shared limit was $5,000. Filing separately, each spouse can exclude up to $3,750.

Neither employer sees the other's plan, so neither Form W-2 flags an overlap. If each spouse elects $7,500, the extra $7,500 becomes taxable on the couple's return, through Form 2441.

A full exclusion also uses up the dependent care credit. Each dollar excluded cuts the credit's expense limit of $3,000, or $6,000 for two or more people in care. Excluding $7,500 leaves no credit at all.

What must employers do to offer the $7,500 limit?

An employer must amend its plan, update enrollment and payroll, and test the plan at the new level.

Check the plan document. The IRS's proposed cafeteria plan rules require the written plan to state its maximum salary reduction. If yours says $5,000, employees cannot elect more until you amend it.
Amend before the plan year starts. Under the same rules, an amendment applies only after it is adopted. The 2025 law added no special rule for late amendments.
Update enrollment and payroll. Show the new maximum on election forms and in payroll.
Test the plan. Four tests apply: contributions and benefits, eligibility, a 25% cap for owners of more than 5%, and the 55% test.
Report it on Form W-2. Box 10 shows all dependent care benefits. Any amount over $7,500 is also wages in boxes 1, 3 and 5.

Why is the 55% test harder to pass at $7,500?

The 55% test compares averages, so a higher cap for top earners raises the bar for everyone else. Other employees must average at least 55% of what highly compensated employees (HCEs) receive.

For 2026, an HCE is a 5% owner, or an employee paid over $160,000 in 2025. If HCEs average $7,500, everyone else must average at least $4,125. At the old $5,000 cap, they needed $2,750.

On August 11, 2026, the IRS proposed testing rules for these plans. They would count only employees who received benefits, measured on the last day of the plan year. A salary reduction plan may leave out employees paid under $25,000.

If a plan fails, HCEs lose the exclusion and everyone else keeps it. Under the proposed rules, an employer could cure a 55% failure by adding the excess to HCE wages by the Form W-2 deadline.

Employers may rely on the proposed rules now. Final rules would apply to plan years beginning on or after their publication.

When do the changes apply?

The limit is already in force, and the testing rules are still moving.

Date	What happens
July 4, 2025	Public Law 119-21 is enacted
January 1, 2026	The $7,500 limit starts
August 11, 2026	IRS proposes testing rules
October 15, 2026	Public hearing, by phone
December 31, 2026	Test date for a calendar-year plan (proposed)
February 1, 2027	Forms W-2 due; last day for the proposed fix

What should you do now?

If you run a plan, check its dependent care maximum before 2027 open enrollment closes.
If it says $5,000 and you want $7,500, adopt a written amendment before the 2027 plan year starts.
Run the 55% test on the new elections, then again at year end.
If you and your spouse both have a plan, agree on a split that totals $7,500 or less.
Elect only what you expect to spend. Money left after the plan year, and any grace period, is forfeited.

For the plan rules in brief, see our entry on the dependent care assistance program (DCAP). To give each employee a CPA, see our employee financial wellness benefit.