Latest Stimulus Increases Dependent Care Maximum

The American Rescue Plan Act of 2021 (ARPA), a $1.9 trillion economic stimulus package intended to accelerate pandemic recovery, includes a temporary increase to the dependent care assistance plan (DCPA) maximum for the 2021 tax year.

The annual limit for single taxpayers is $10,500 (up from $5,000). Married individuals filing separately will have an annual limit of $5,250 (up from $2,500).

Employers who want to allow employees to make new elections up to the new maximum will need to amend their plans. Employees should be notified as soon as the decision is made. This will allow them time to make their decision to spread the higher contribution amount over as many pay periods as possible.

Source: flyte Human Capital Management