Dependent Care Flexible Spending Account (FSA)

Working families who exist in a two-income household and need to pay for nannies or daycare for young children, or for visiting nurse services if there's a medically infirm spouse or elder relative, have IRS tax deduction approved options. That is, if they commit to spending whatever on that care in advance, they get to deduct it. Or said another way, by using pre-tax money that an employer sets aside into an employee’s registered Flexible Spending Account (FSA), the money becomes tax exempt and can be used to pay for such services without dipping into post-tax earnings.

In recognition of the millions who rely on FSAs and work for small businesses that cannot afford 401(k) and comprehensive health insurance, legislation is in process going into 2019 which may allow greater flexibility for OTC drug purchases and preventive care, like sports and fitness expenses. Sorry to disappoint, but it doesn't include coverage of recreational drugs or skateboarding gear.