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We all know child care is expensive — on average, it makes up at least 22% of a family’s annual income. The best way for you to cut down on child care expenses is by enrolling in a Dependent Care Account through your employer during the open enrollment period. Maximizing this type of flexible spending account (FSA) can save you about $2,000 in 2025. But what happens if you missed open enrollment?
Unless you experience a “life-changing event” — such as getting married, having or adopting a child or changing your job — you’ll have to wait until open enrollment begins towards the end of the year. But did you know hiring a nanny can also be considered a life-changing event?
“When you have a change in child care provider or change in child care costs, it usually allows you to sign up for a Dependent Care Account within 30 days of the change,” says Tom Breedlove, Sr. Director of Care.com HomePay. “This works out perfectly in situations where you may have forgotten to enroll when your child was born but need to hire a nanny because you’re going back to work after parental leave.”
Are there different rules for a Dependent Care Account when you enroll mid-year?
The rules for a Dependent Care Account don’t change if you sign up outside of your company’s open enrollment period. You can still put a maximum of $5,000 pre-tax (or $2,500 per spouse if you and your spouse are married but file separate tax returns) toward your nanny’s wages. The savings come from not owing any taxes on the money in your FSA (Social Security, Medicare, income taxes, etc.).
Does my nanny get paid through my Dependent Care Account?
No, you must finance your FSA up front. You’ll then pay your nanny via your personal bank account each pay period and submit pay stubs to your HR department for reimbursement. This procedure means you’ll need to know in advance how much in child care expenses you’ll accrue for the remainder of the year.
Can HomePay set up a Dependent Care Account for me?
Unfortunately, no. This is something that must be done by you through your employer. We’ll take care of running your nanny’s payroll, filing the household employment tax returns required by the IRS and the state, and most importantly, generating the pay stubs you’ll need to get reimbursed from your FSA.
Can I still use a Dependent Care Account if I pay my nanny under the table?
It’s highly unlikely that your HR department will authorize reimbursement from your FSA without formal proof of child care expenses. It’s not enough to show an electronic payment to your nanny (Venmo/PayPal/Square/etc.) as evidence — you’ll need to show a pay stub, which should include tax withholdings. The good news is the money that you’ll save by using a Dependent Care Account will largely offset the household employment taxes you’ll incur by paying your nanny over the table. Use our budgeting calculator and see for yourself!
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