Qualifying Dependent

[KateSmithPA]

I do not administer our cafeteria plan, but have been asked this question.

Child turns 13 on August 31st. Can employee claim dependent care expenses through that date and have the deductions from pay for all 12 months. Or, is the child ineligible all year because he turns 13 during the year?

Thank you.

Kate Smith

[GMK]

I don't have the answer (sorry), but I have what is probably a dumb question:

Why is the child ineligible at age 13?

[J Simmons]

Hi, Kate,

For purposes of being a health care dependent, turning a specific age, like 19 or 25, during the year disqualifies health expenses for that dependent from qualifying for tax exclusion.

However, for day care assistance purposes, the tax-free assistance can be for day care for an otherwise qualifying child up until his 13th birthday. IRC § 21(b)(1)(A).

[KateSmithPA]

I'm sorry, I wasn't more clear. We are speaking of dependent day care. So the employee may contribute to the cafeteria plan for dependent care for a child who will become ineligible as of September 1?

[J Simmons]

I'm sorry, I wasn't more clear. We are speaking of dependent day care. So the employee may contribute to the cafeteria plan for dependent care for a child who will become ineligible as of September 1?

Yes, and only expenses incurred through August 30 for day care expenses otherwise eligible will qualify for reimbursement. The health care dependent mention was simply to note that it is the context where the whole year is ineligible if they turn that age mid-year. For day care expenses, they qualify if rendered in that year before the birthday.

[KateSmithPA]

Thank you for the clarification and for the help.

Kate Smith