How to save with a Flexible Spending Account
More than 14 million American families rely on Flexible Spending Accounts (FSAs) for out-of-pocket healthcare expenses. You can typically save up to 40% on the money you contribute to your FSA, but it depends on how much you set aside and on your tax bracket. Your FSA funds are exempt from income taxes and payroll taxes for Social Security and Medicare. Easily calculate what your savings could be using our FSA Calculator.
It’s best to check with your FSA administrator if you’re wondering how much you can set aside in your FSA. As of January 1, 2013, the maximum you can contribute to an FSA (per account) is $2,500 due to health care reform, however some employers limit the contribution maximum to less than this.
Employers can also contribute to your FSA (in addition to the $2,500) if they choose. Recent IRS changes to the “Use it or Lose it” provision give employers even more options, where they can choose to allow up to $500 to get carried over from the previous FSA year or allow for a two and a half month grace period extension if they wish.
How you Save:
- Research your FSA. Knowing what an FSA covers will help you decide how to best spend your FSA funds.
- Maximize your FSA throughout the year. Use it for a variety of FSA eligible expenses including out-of-pocket costs at the doctor’s office (co-pays, deductibles and co-insurance), dental and eye care, and on medical products and supplies.
- Elect a Dependent Care FSA. A Dependent Care FSA (or DCA or DCAP) is a type of FSA that allows you to set aside pre-tax money for child care or adult dependent care needed to allow you and your spouse to work, look for work, or attend school full-time. Learn more about a Dependent Care FSA.
- Shop for FSA eligible products at FSAstore.com! We have special offers to help you save even more on all your favorite medical products and supplies.
Have an upcoming deadline? Check out our blog post on how to Spend Down Your FSA with these 5 surprising FSA eligible products.
What topics are you confused about in terms of your FSA? Leave a comment below and we’ll get an answer to you.