In 2019, only 42% of workers had access to dependent care assistance. For many Americans, the cost of daycare, supervision for an aging parent, or care of an incapable spouse is a significant monthly expense. Let BASE® help turn your employee’s dependent care expenses into tax savings!
The BASE® Dependent Care Assistance Plan (DCAP), a fringe health care benefit that allows employees to pay for their employment-related dependent care expenses on a pre-tax basis. When an employer sponsors a DCAP, employees can elect up to the government established limit of $5,000, having it deducted pre-tax from their paychecks helps to reduce the amount of income subject to taxes.
Under the DCAP, the money set aside on a pre-tax basis can be used for a child/children under the age of 13, a dependent such as a parent, spouse, or sibling incapable of self-care, or disabled dependent that receives care outside the home.
Qualifying expenses for the DCAP are outlined below:
- Daycare, preschool, and pre-kindergarten expenses
- Before and after school care
- Adult and elderly care programs
The biggest benefit to both the employer and employee is the tax savings. The employee can continue to work and have the peace of mind knowing they are establishing funds to help pay for the cost of their dependent care expenses, and see an increase in their take-home pay by saving on Federal, State, Social Security, and Medicare taxes.
Employees can save 25-40% in taxes for every dollar they elect. Check out the example below on how an employee could turn their dependent care expenses into tax savings >>>
DEPENDENT CARE TAX SAVINGS
Based on $5,000 election & 27% tax rate (22% Federal & 5% State)
Monthly Tax Savings: $112.50
Annual Tax Savings: $1,350.00
Want to find out what you could be saving? Check out the BASE® 125 Cafeteria Plan Tax Savings Calculator!
With the addition of this 125 Cafeteria Plan, the employer can offer an enhanced benefits package that will help with recruitment and retention of employees, and reduce the employer’s share of payroll taxes by allowing their employees to elect pre-tax contribution for their dependent care.
No matter the eligible dependent care expense, the BASE® 125 Cafeteria Plan provides additional financial assistance to allow employees to take care of their family with pre-tax dollars, helping to stretch their hard-earned dollars. Employers can save valuable tax dollars while providing a service to help their employees pay for their dependent care. Click here to read more about the BASE® DCAP or call 888.386.9680.