In the event of a divorce with two children. Each parent files as "Head of Household" and claims one child. Can one parent use their FSA to pay for both children? or, Must each parent use their own FSA for the child that is claimed as their dependent?

[xmasbaby0]

Not so fast.   Which parent do the children live with?   Only the custodial parent can file as Head of Household.   The IRS cares about physical custody.    The parent with whom the child lived  for at least 183 nights is the custodial parent who can file as HOH, get earned income credit, and childcare credit.  The NON-custodial parent can claim the child as a dependent and get ONLY the child tax credit---no other child-related credits.

[Opus 17 · Accepted solution]

An FSA may be used to pay for care for self, spouse, and dependents, including a child who would be a dependent except for divorce or separation.

However, I do want to note that both parents can't legally file for HOH unless one child actually physically lives more than half the year with each parent.  The IRS follows physical custody--where the child actually lived--and not state court custody orders or decrees.  It is certainly possible to arrange custody so that one child spends more that half the year with one parent, and the other child spends more than half the year with the other parent, but you have to physically arrange that.  It only has to be one day (183 nights with one parent and 182 nights with the other parent), but you have to make it happen.   (And of course, if the parents only separated in 2024, it might be the case the children spent more than half the year with both parents because of when the split occurred.  But for 2025, you may have to work to get that "more than half the year" requirement for each child.)