Dependent Care with spouse as student

[Guest aearle]

It is my understanding that if an employee who chooses to participate in a dependent care FSA and the spouse is a full-time student, then the annual limit is based on deemed income: $2400 per year for one child and $4800 per year for two or more children. I am seeking clarification about the number of children: does "two or more children" mean the number of children the person claims as dependents for tax purposes OR the number of children that the employee is actually paying for to receive day care?

Here is the scenario:

The employee has 2 kids...one is 3 1/2 yrs. old and goes to a daycare center; the other is 1 year old and is babysat by the grandparents who do not charge for their babysitting services. Can this couple claim the $4800 DDC FSA amount if they are only paying for 1 child to receive daycare? Must the reimbursement requests/receipts show expenses for each child or can they incur the full $4800 for one child's expenses?

Thanks!

[papogi]

Based on how you are describing the language of this particular employer's plan, you only have access to up to $2400 per child. Doesn't look like the employee can get $4800.

[Guest Jeff V]

I'm fairly new to FSA administration, so if I'm missing the point, please let me know, but...

Seems to me the limit is the lesser of a) $5,000/$2,500 if married filing joint or separately or b) the plan limit, or c) the actual amount of daycare expenses incurred by the employee while a child is at a daycare center during hours the employee works.

[SLuskin]

You can't elect a higher daycare amount than the "imputed income" of the disabled or student spouse. I was thinking that the amount of imputed income that is permitted now has been increased to go along with the increased limits on the 1040 $3000,$6000.

That's actually $250/month for 1 qualifying individual and $500/month for 2 or more. But it looks like there's only 1 in this case.