What's Changing
Starting Jan. 1, 2027, the Childcare Choice and Backup Care programs will transition from a fiscal year schedule (July-June) to a calendar year schedule (January-December).
These changes align the program with tax reporting periods and other dependent care benefits, making it easier to plan and manage your childcare expenses.
However, if you participate in any other dependent care benefits (FSA, Backup Care, etc.), there may be some tax and contribution impacts that you will want to be aware of heading into 2026.
Childcare Choice Transition Timeline
| Timeline | Program Details | How You Access Benefits |
|---|---|---|
| Now-June 2026 | Current fiscal year Childcare Choice program | Quarterly cost form submissions |
| July-December 2026 | Childcare Choice Transition period - $1,000 benefit only; Childcare Choice applications open August 3, 2026 | Quarterly cost form submissions |
| January 2027 onward | New calendar year program - $2,000 benefit; Childcare Choice applications open Jan. 4, 2027 | More details to come. |
What This Means for You
Planning Your 2026 Dependent Care FSA Contributions
During Open Enrollment 2025 (Oct. 20-Nov. 7, 2025), consider the following when electing your 2026 Dependent Care FSA contributions:
If you plan to participate in Childcare Choice, consider all funding sources (including the Backup Care Program) that may be available to you in 2026:
- Any remaining funds from the current fiscal year (July 2025-June 2026, up to $2,000 total) that you claim via reimbursement in 2026
- Plus $1,000 during the transition period (July-December 2026)
Depending on when you enroll and submit reimbursements, you may have more than just $1,000 to account for when planning your 2026 Dependent Care FSA election.
- The IRS limit for combined dependent care benefits (FSA + subsidized programs like Childcare Choice and Backup Care) has increased from $5,000 to $7,500 per household ($3,750 for married filing separately)
- When you exceed the IRS dependent care limit, the excess amount is no longer tax-free and becomes taxable income. This applies to Dependent Care FSAs and other employer-provided dependent care benefits.
- Overestimating your FSA contribution could result in forfeiting unused funds.
- The higher 2026 Dependent Care FSA limit ($7,500) and your control over when you submit reimbursement requests* give you flexibility during the transition.
*Important: For IRS purposes, dependent care benefits are counted in the year you receive the reimbursement, not when you incur the expense. This means you can strategically time your Childcare Choice cost form submissions to manage which tax year the reimbursements are applied to—helping you stay within the annual $7,500 limit and avoid having excess amounts become taxable income.
Frequently Asked Questions
This represents the prorated transition from fiscal year to calendar year. You're receiving a 6-month benefit ($1,000) for the 6-month period.
You'll continue submitting cost forms quarterly as usual. The total available for July-December 2026 is $1,000.
Yes, consider your total 2026 dependent care benefits when deciding whether to submit before year-end or in January 2027.
Important: For IRS purposes, dependent care benefits are counted in the year you receive the reimbursement, not when you incur the expense. This means you can strategically time your Childcare Choice cost form submissions to manage which tax year the reimbursements are applied to, which helps you stay within the annual $7,500 limit and avoid having excess amounts become taxable income.
All employer-provided dependent care benefits, including your FSA contributions, the $2,000 reimbursement, Backup Care Program usage, and any other dependent care benefits.
The IRS limits combined dependent care benefits to $7,500 per household ($2,500 for married filing separately). This includes your Dependent Care FSA, Childcare Choice subsidies, and Backup Care reimbursements.
If you exceed this limit: The excess amount is no longer tax-free and becomes taxable income. It will be reported on your W-2 and subject to federal and state income taxes, as well as FICA taxes (Social Security and Medicare). This means you may owe additional taxes when you file your tax return or see adjustments to your withholding.
We recommend consulting a tax professional for personalized advice on how to optimize your dependent care elections and avoid unexpected tax liability.
Yes, but the combined total cannot exceed the IRS limit. Plan your 2026 FSA election with the $1,000 Childcare Choice funding in mind.
Contact Us
Have questions about these resources?
Connect with the Life & Work Connections Team
Phone: 520-621-2493
Email: lifework@arizona.edu
Have questions about your benefits?
Connect with the HR Solutions team
hr.arizona.edu/contact-us