2021 – 03/15 An employee benefit has been greatly expanded by the American Rescue Plan Act (ARPA), which was signed into law on March 11. Many employers maintain flexible spending cafeteria plans to help employees pay for dependent care while they work. Under a qualified dependent care assistance program (DCAP), certain amounts paid or incurred by an employer generally aren’t included in an eligible employee’s gross income. Under prior law, the exclusion amount was limited to $5,000 per year ($2,500 for married persons filing separate returns). For 2021 only, the exclusion has increased to $10,500 for most taxpayers ($5,250 for married filing separately), not to exceed the employee’s earned income.
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