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3 ways to save using a flexible spending account (FSA)
It's almost April 15 – the final day to get your income tax returns in. Some early birds got their taxes done a while ago, but many dread the process and wait until the last minute.
The good news is that you still have time to file taxes for a few more days!
With taxes in mind, here are 3 ways in which you can save on health care throughout the year that will make tax season a little less painful.
1. Enjoy Your Tax-Free FSA
If you're signed up for a Flexible Spending Account, then you know that these plans are tax-free. An FSA provides mutual benefits to you and your employer. FSAs are not only exempt from income taxes, but also from payroll taxes for Medicare and Social Security. Read more about how a flex spending account works.
Tax Filing Tip: You cannot claim expenses covered by your FSA on your annual income tax return. There are actually no reporting requirements for FSAs – you can breathe easy. Keep in mind that total medical expenses that can be deductible on your income tax return have to exceed 7.5% of your adjusted gross income for 2012. This number will be increasing to 10% in 2013. Luckily, FSAs do not have such limits!
*If you have an HSA, you must report it using Forms 8889 & 1040, according to the IRS. Contributions to HSAs are also tax-free, and the money put into these plans can be used at a later date.
2. Reduce Spending on Services
A recent Wall Street Journal report revealed that Americans spent an average of $6,815 (per person) on health care in 2009. By using an FSA, you can save up to 40% on the money you contribute towards qualified health expenses. The same Wall Street Journal article notes that “big-spending states had some of the highest per-person spending on hospital care and doctors' services, which make up the bulk of medical costs."
FSA Eligible Services
Need to visit a specialist? You can with your FSA. Your FSA will cover co-payments and deductibles on visits to FSA eligible service specialists such as chiropractors, dentists, surgeons, ophthalmologists and others.
3. Use Pre-tax Money on Qualified Products
Many common health care products (contact lens solution, band aids, shoe inserts, etc.) are eligible with an FSA. Any over-the-counter medicines will require a prescription to be reimbursed with your FSA, but thousands of products are fully eligible without prescriptions. FSA Store regularly updates our selection of FSA eligible products.