Do I, or my spouse if married, have to earn income during the year to use a Dependent Care Reimbursement Account (DCRA)?
A DCRA allows you to be reimbursed on a pre-tax basis for childcare or adult dependent care expenses for qualified dependents that are necessary to allow you or your spouse to work, look for work (with income during the year), or your spouse to attend school full-time. You (and your spouse if you are married) must have earned income during the year, however if your spouse attends school full-time he or she does not need to have earned income. Under Internal Revenue Code section 129 (see sections 129(a)(2)(A) and 129(b)(1)), the maximum amount that can be elected for a DCRA is limited to the lesser of:
• $5,000 for single individuals or married couples filing joint returns;
• $2,500 for married couples filing separate returns,
• the employee's earned income (if less than $5,000/$2,500) or
• the spouse's earned income (if less than $5,000/$2,500).