Does accepting a child care subsidy carry any tax or other implications?
Child care subsidies are generally taxable as income to the recipient. However, if an agency implements the child care subsidy program as a dependent care assistance program as described in section 129 of the Internal Revenue Code, amounts of up to either $2,500 or $5,000 may be excluded from gross income.

Further, the amount of income that can be set aside to be used pretax for dependent care under the flexible spending account program is reduced by the amount of any child care subsidy.

2020 Digital Almanac

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