A church offers a day school for nursery to preschoolers, in which our eldest child (3) is enrolled, (and we pay totally out of pocket as my wife is currently a full-time mom.

My wife is considering going back to work, and one of the options is to work as a care provider for this same day school as well as in the nursery during services/special church activities.

Would our eldest child's day school tuition be FSA-eligible if my wife worked for the same school?
I know there's a rule forbidding FSA payments to a caregiver that can be claimed as a dependent (paying a spouse, older child or a live-in grandparent to babysit during the day), but what happens when there's a corporate entity (in this case a religious nonprofit) between the money we pay and the money my wife gets?

  • Just to be clear, this isn't a co-op, right? It's a daycare that she would be happening to work for (and, perhaps getting a discount, but not directly trading her work for care)? – Joe Oct 26 '15 at 19:36
  • AFAIK that's not the case, this isn't just a group of moms trading off babysitting for a MDO program; the church would hire her, part-time, as an attendant/teacher for whomever comes through the door with the required dues, whether her own kids can/do attend or not. – KeithS Oct 26 '15 at 19:49

I don't think there is any reason you couldn't use a dependent care FSA (or claim the child/dependent care tax credit, though the FSA is by far the superior option of course for one child) in this situation. As long as your wife is an employee of a corporation (even if it is a nonprofit), you're sufficiently distant such that it's not the situation the IRS excepts (someone you could claim as a dependent providing care).

Further, there's no reason the rule should be interpreted to exclude the class of people you're discussing (working parents who choose to work at a daycare); they're still working for a living, and thus should be equal to any other recipient of the credit.

| improve this answer | |
  • I didn't see any particular evidence of this unfortunately in terms of rules addressing this or other references (hence why I held of posting, hoping one of our tax experts would comment). I suspect it's just one of those 'obvious' things that's not covered explicitly ... – Joe Oct 28 '15 at 1:21

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.