Dependent Care Expense Account Maximum increased for 2021

Dependent Care Expense Account Maximum increased for 2021

Good news if you use dependent care! The Internal Revenue Service (IRS) has increased the 2021 annual maximum for the Dependent Care Expense Accounts (DCEA) to $10,500 for families ($5,250 for married filing single). To start a DCEA account or increase your 2021 elections, complete the 121 Benefits Change in Participation form and email it to segip.mmb@state.mn.us.

Here are a few things to note:

• Choosing to increase your 2021 election will increase the pre-tax deductions taken from your payroll checks for the remainder of the year. Since we’re halfway through the year, these amounts will be higher than if they were elected at the start of 2021.
• You can use these contributions to pay for eligible expenses dating back to Jan. 1, 2021, so long as you were eligible to participate in the plan at that time.
• As of now, the $10,500 maximum is for tax year 2021 only. The maximum for 2022 will return to $5,000.
• You can carry over up to $15,500 of unused DCEA contributions to 2022. This includes:
  • $5,000 unused contributions that were carried over from 2020
  • $10,500 of your unused contributions from 2021

Federal regulations do not currently allow a DCEA carryover from 2022 into 2023.

Learn more about pre-tax benefits. If you have questions, please contact 121 Benefits at 612-877-4321 or talk to your tax advisor.