Types of Accounts
Medical Care Reimbursement Account
The Medical Care Reimbursement Account allows you to pay with pre-tax dollars for health care expenses that are not covered by insurance. Eligible expenses generally include health care expenses for you as well as your spouse and dependent children. The following examples are some common expenses:
- Co-payment, deductibles and other portions of medical costs that your health benefit does not pay
- Vision Care expenses such as contact lenses and glasses not covered by any plan
- Hearing aids and batteries
- Dental expenses not fully covered by any dental plan
- Physical exams and doctor's office visits not covered by a medical plan
- Prescription drugs not paid for under any medical plan
- Special services or supplies for vision and hearing impairments
- Special facilities for mentally disabled dependents
- Chiropractic services
- Special schooling for physically or mentally disabled dependents if the expenses are for services to relieve the disability
- Medically necessary supplies and equipment used only for medical purposes, if not covered by your medical plan.
For a printable version of common eligible and ineligible expenses, click here.
For a complete list of eligible expenses, you can access the IRS web site at http://www.irs.gov/publications/p502/index.html.
Dependent Care Reimbursement Account
The Dependent Care Reimbursement Account allows working parents who pay for daycare of a dependent under the age of 13 (or any adults or other IRS eligible dependents who are physically or mentally incapable of taking care or themselves) to pay for those expenses with pre-tax dollars by redirecting funds to this option.
You can set aside up to $5,000 each year on a tax-free basis to pay for eligible dependent care expenses. Examples of eligible dependent care expenses are as follows:
Eligible Dependent Care Expenses
- Daycare Centers
- Preschool tuition and registration fees - kindergarten tuition fees are not eligible
- Before and after school care
- Day camp only. Overnight camp is not eligible
- Daycare in your home or your daycare provider's home
Ineligible Dependent Care Expenses
- Health Care expenses for a dependent (these are reimbursed only through the Medical Care Account)
- Expenses incurred prior to the effective date of your participation
- Expenses incurred during an unpaid leave of absence
- Child care or baby-sitting services by your spouse, by someone you claim as an exemption on your federal income tax return, or by any one of your children who is living with you and under age 19
- Housekeeping expenses not related to dependent care
- The cost of food or clothing for a dependent
- Transportation expenses between your home and the place where dependent care is provided
- Dependent Care Expenses which you claim as deductions on your federal tax return
- Schooling costs for children in kindergarten and above
- After school sports, educational or enrichment programs (such as computer tutoring or music classes)
- Dependent care expenses from a facility that is not a qualified dependent care center (such as one caring for more that 6 children that does not meet licensing requirements)
- Expenses for overnight stays (boarding) including overnight camps
Tax Credit versus Dependent Care Reimbursement Account
Dependent Care expenses that you submit cannot be claimed toward the tax credit on your tax return. As a general rule, if your income tax bracket is greater than the percent allowed for the tax credit, the Dependent Care Reimbursement Account will allow you to save the most. You are encouraged to contact a professional tax consultant to determine if it would be more advantageous to claim the tax credit.