When doing your taxes, FSA owners can itemize whatever they want, except for FSA expenses.
This money has already been removed from the equation, and trying to get
a further tax break on the funds is considered “double dipping.”
(It’s also easily recognized and highly frowned upon by our friends at the IRS,
so be organized when it comes time to file!)
Note: Unlike HSAs, which must be reported on your Form 1040, there are no reporting requirements for FSAs on your income tax return.
Bigger Note: If you have any unused amounts in your FSA (after grace periods run
out or in excess of any rollover you may be allowed), that amount is forfeited due
to the “use-it-or-lose-it” rule. This, you might already know. But you can’t claim
these unused funds as a loss on your tax return - your arrangement already counts
as a deduction.
Like we mentioned at the beginning of this guide, no one wants to think about the Tax Man when using their FSA dollars. But we’ve learned it’s always better to be ready, in case your individual tax situation requires a little more attention. With proper record keeping and account management, your FSA can be a tax-free source of relief come mid-April.