Page 16 - 2018 MDT Benefits & Notices

Member Driven Technologies (MDT) 2018

DCRA

• This amount lets you pay eligible dependent care expenses with
pre-tax dollars. Most child and elder care and services are eligible
expenses. Your dependents must be;
o Under age 13 or mentally or physically unable to care for
themselves
o Spending at least 8 hours a day in your home
o Eligible to be claimed as a dependent on your federal tax return
o Receiving care when you are at work and your spouse (if you are married) is at work or is
searching for work, is in school full-time, or is mentally or physically disabled and unable to
provide the care
• The most you can put into the DCRA is $5,000 per household. If both you and your spouse work,
the IRS limits your maximum contribution to a DCRA.
o If you file separate income tax returns, the annual contribution amount is limited to $2,500
each for you and your spouse
o If you file a joint tax return and your spouse also contributes to a DCRA, your family’s
combined limit is $5,000
o If your spouse is disabled or a full-time student, special limits apply
o If you or your spouse earn less than $5,000, the maximum is limited to earnings under
$5,000
• With a DCRA, you can be reimbursed up to the amount that you have in your account. If you file a
claim for more than your balance, you’ll be reimbursed as new deposits are made.
• Eligible dependent care expenses can either be reimbursed through the DCRA or used to obtain
the federal tax credit. You can’t use both options to pay for the same expenses. To find out what
is best for you and your family, talk to your tax advisor or take a look at IRS publication 503 on the
IRS website at www.irs.gov/pub/irs-pdf/503/pdf .
• If you contribute to a DCRA, you must file an IRS Form 2441 with your Federal Income Tax Return.
Form 2441 is simply an informational form on which you report the amount you paid and who you
paid for day care.

“Use It or Lose It” – Sounds Scary? Don’t Let It Scare You!!!

The IRS says that money left in an HCRA or DCRA account at the end of the year has to be forfeited.
People call this the “Use It or Lose It” rule. This may sound scary, but do not let it keep you from enrolling
in these accounts and benefiting from its tax advantage. You can avoid losing any money with just a little
pre-planning

Many medical out-of-pocket expenses are predictable. If you say “Every year I pay my medical deductible”,
why not put the amount of the deductible into the HCRA and pay with tax-free money? Or perhaps you
have one or two prescriptions each month that combined have a cost of $65. Set aside $780 ($65 x 12)
and pay the copays with the tax-free dollars.

Dependent care expenses can usually be budgeted ahead of time.

And remember, that your tax savings is a “cushion”. Let’s say you put $1,000 in the HCRA. Typically your
tax savings is $250 or so (with a 25% tax rate). At the end of the year you leave $100 unspent. You are
still ahead by $150 in tax savings.

We have a worksheet to assist you in determining your qualified expenses. Click WORKSHEET to help
get you started.
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