Updated October 30, 2026. Quick answer: The most that can be excluded from income under an employer dependent care program is $7,500 for 2026 ($3,750 on a separate return by a married individual), up from $5,000 ($2,500). Public Law 119-21 section 70404 changed the figures in 26 U.S.C. 129(a)(2)(A) for taxable years beginning after December 31, 2025. The 2027 version has its own page, the dependent care FSA limit for 2027.
For what changed on the 2026 draft of the form, see Form 2441 2026 changes.
The 2026 limit
Section 70404(a) of the 2025 law reads: “Section 129(a)(2)(A) is amended by striking ‘‘$5,000 ($2,500’’ and inserting ‘‘$7,500 ($3,750’’.” On timing, section 70404(b) says: “The amendment made by this section shall apply to taxable years beginning after December 31, 2025.”
| Tax year | Single or joint return | Separate return by a married individual | Source |
|---|---|---|---|
| Before 2026 (prior law) | $5,000 | $2,500 | 26 U.S.C. 129(a)(2)(A) before Public Law 119-21 |
| 2026 | $7,500 | $3,750 | Public Law 119-21 section 70404 |
The prior rule, for comparison
Prior law, as the 2024 edition of the Code printed it before the 2025 amendment, read: “The amount which may be excluded under paragraph (1) for dependent care assistance with respect to dependent care services provided during a taxable year shall not exceed $5,000 ($2,500 in the case of a separate return by a married individual).” That wording is prior law and does not describe 2026. Section 70404, the enhancement of the dependent care assistance program, replaced only the dollar figures in the sentence.
The earned income cap still applies
The dollar limit is not the only cap. The earned income limitation in subsection (b) also applies. For an unmarried employee it is “the earned income of such employee for such taxable year, or” For a married employee, the cap is “the lesser of” the employee’s earned income and “the earned income of the spouse of such employee for such taxable year.”
An invented example: one spouse earns $90,000 (invented, for the computation) and the other earns $4,000 (invented, for the computation). The lesser earned income is $4,000 (computed as the smaller of the two), so the exclusion cannot exceed that amount even though the dollar limit is $7,500. The tax credit for the same kind of care has its own rules, on the child and dependent care credit for 2026, and the health care FSA limit is on the FSA contribution limit for 2026.
Common mistakes
- Using $5,000 for 2026. That is the prior-law figure; the 2025 law substituted $7,500 for taxable years beginning after December 31, 2025.
- Forgetting the $3,750 figure for a separate return by a married individual. The amended sentence keeps that category.
- Treating the dollar limit as the whole rule. The exclusion is also capped by earned income, as the statute’s subsection (b) sets out; Form 2441 applies it on Form 2441 lines 16 to 21, expenses, earned income and plan limit.
Related: the child and dependent care credit for 2026, the FSA contribution limit for 2026, Form 2441 lines 16 to 21, expenses, earned income and plan limit, and the dependent care FSA limit for 2027.
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Answer againSources
- Public Law 119-21 (One Big Beautiful Bill Act), July 4, 2025, enacted text (U.S. Government Publishing Office): www.govinfo.gov
- 26 U.S.C. 129, Dependent care assistance programs (U.S. Code, 2024 edition, U.S. Government Publishing Office): www.govinfo.gov
Read from the primary documents linked above on October 30, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.