Updated April 2026 · Florida Plan Finder · Licensed Florida Health Insurance Producer

Dependent Care FSA Tax Savings for Florida Small Business Employees

A Dependent Care Assistance Plan (DCAP), commonly called a dependent care FSA, lets a Florida small business offer employees up to $5,000 per year in pre-tax salary reductions for childcare, after-school care, day camp, and adult dependent care expenses. Both the employee and employer save 7.65% FICA on every dollar that runs through the account. Setup is typically free or very low cost when added to an existing Section 125 plan, and the employer FICA savings can completely offset the per-employee admin fee in groups of 10 or more.

2026 DCAP Contribution Limits

The limit is per household, not per employee. If both spouses have access to a DCAP, they combine for one $5,000 cap.

Qualifying Expenses

• Childcare for children under 13 (daycare, preschool, after-school programs, summer day camp)
• Care for a spouse or other dependent who is physically or mentally incapable of self-care
• In-home care provider (nanny, household worker who provides care)
• Care must enable the employee (and spouse if married) to be gainfully employed or actively look for work

Excluded: overnight camps, kindergarten tuition, school tuition for K-12, evening babysitting unrelated to work.

FICA Savings Example

10 employees each electing the maximum $5,000 = $50,000 of pre-tax salary reductions:

• Employee FICA savings: $50,000 × 7.65% = $3,825 across the 10 employees
• Employer FICA savings: $50,000 × 7.65% = $3,825
• Employer income tax: same — wages are already deducted whether pre-tax or not

If the DCAP admin fee is $4/employee/month = $480/year for 10 employees, the FICA savings still net the employer ~$3,345.

Nondiscrimination Tests

DCAPs are subject to a 55% average-benefits test: highly compensated employees cannot receive more than 55% of total benefits paid. Most small Florida businesses pass easily because participation is broad. The test is at year-end. Failed tests result in HCEs being taxed on excess benefits.

Coordination with the Child and Dependent Care Tax Credit

Employees cannot double-dip: expenses paid through a DCAP cannot also be claimed for the federal Child and Dependent Care Credit (Form 2441). For most middle-income Florida families, the DCAP is more tax-efficient than the credit because the DCAP saves both income tax AND FICA, while the credit only reduces income tax. Higher-income families with limited credit benefit usually prefer the DCAP.