This bill would increase the annual limit for dependent care flexible spending accounts (FSAs) from $5,000 to $7,500 for individual filers and from $2,500 to $3,750 for married couples filing separately. Dependent care FSAs allow workers to set aside pre-tax income to pay for eligible childcare and adult dependent care expenses. The change would take effect for tax years beginning after December 31, 2024, meaning it would first apply to the 2025 tax year. The bill would primarily benefit working parents and caregivers by allowing them to exclude more income from taxation when using these accounts for dependent care costs. There is no specific funding amount mentioned, as this is a tax code change that affects how much income employees can exclude from taxation rather than an appropriation of government funds.
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