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DCFSA - 2 Children - Divorced


Isneeze
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My ex (divorced) and I both work and will be splitting physical custody (50/50) of two children.  We plan to alternate some of the nights such that the child we're claiming will be with us >50% of the time..  Both of our employers offer DCFSA, are we both allowed to open an account if we're claiming one child each?  Both kids will be under her health insurance if that applies to anything.

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@Isneeze great user name ?

In general, the answer is yes--you can each open a dependent care FSA with your employers and submit dependent care expenses incurred for the children for whom you qualify as the custodial parent.  Custodial parent status generally requires the parent to have custody for a greater portion of the calendar year.

This post hopefully will address your situation: https://www.theabdteam.com/blog/dependent-care-fsa-for-parents-who-are-divorced-separated-or-living-apart/

There are some complexities, but her is the general rule:

Dependent Care FSA Available Only to Custodial Parent

Where parents are divorced, separated, or living apart, only the custodial parent is permitted to utilize the dependent care FSA for the child’s day care expenses.

The “custodial parent” is defined as the parent with whom the child resides for the greater number of nights during the calendar year. 

When the number of nights with each parent is the same, the parent with the higher adjusted gross income is treated as the custodial parent.  Special rules also apply for determining the custodial parent where a child lives for a greater number of days, but not nights, with a parent because of the parent’s nighttime work schedule.

The noncustodial parent cannot utilize the dependent care FSA for the child even if the noncustodial parent is financially responsible for paying for the child’s care, the child lives with the noncustodial parent for some significant portion of the year, or the noncustodial parent can claim the child as a tax dependent.

 

Here are some split custody examples that may be helpful:

Where the Child Resides with Each Parent for a Portion of the Year

Where the child resides with each parent for part of the year, only the parent who is the “custodial parent” can have eligible dependent care FSA expenses for the child.

For example:

  • The custodial parent can have eligible daycare expenses for the period the child resides with the custodial parent (even if the noncustodial parent can claim the child as a tax dependent).
  • If the noncustodial parent pays for the daycare expenses while the child resides with the custodial parent (e.g., if required by the terms of the divorce decree), neither parent has eligible daycare expenses because the expenses were not incurred by the custodial parent.
  • If the noncustodial parent pays for the daycare expenses while the child resides with him or her, neither parent has eligible expenses because the noncustodial parent cannot have eligible expenses (even for the period of the year in which the child resides with the noncustodial parent).
  • If the custodial parent pays for the daycare expenses while the child resides with the noncustodial parent, neither parent has eligible daycare expenses for that period because the expense does not permit the custodial parent to work.

I copied the applicable cites at the bottom of the post if you want to dig through the details.  You may want to consult with your personal tax advisor to confirm custodial parent status and eligible expenses here.

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