Small Business Dependent Care FSA Opportunity Act

Small business dependent care credit

If enacted, eligible small employers would be able to claim a nonrefundable tax credit for startup costs to set up or run a dependent care flexible spending account (FSA). The credit would equal your qualified startup costs paid or incurred in a taxable year, subject to limits in the first credit year and the two taxable years immediately following. In those three years the dollar limit would be the greater of $500 or the lesser of $250 per non‑highly compensated employee eligible to participate and $5,000. The credit would be zero in any other taxable year. Qualified startup costs would mean ordinary and necessary expenses to establish or administer the dependent care FSA or to educate employees, and the plan must have at least one eligible non‑highly compensated participant. The credit would be treated as part of the general business credit for claiming on tax returns and would apply only to amounts paid or incurred after enactment in tax years ending after that date.