Asked and Answered: How much should I contribute to my FSA?

If you just opened (or are about to open) an FSA during open enrollment, you know it's smart a money move, but you have no idea how much you should allocate. You've done your research and know that your employer offers flexible savings accounts, but you're not sure how to find your FSA allocation number.

In fact, you may not even be sure how much you spent on health expenses last year. Or maybe you had the perfect allocation total last year, but life has changed since then. (That tends to happen a lot in my household.)

If this sounds like you, don't panic. You've already taken the first step and decided that you want to open an FSA. The next step is simple: use an FSA calculator.

(As always, keep in mind that we're not financial professionals, nor is this website aiming to provide financial or tax advice. Be sure to speak with a qualified financial adviser before making determinations about your accounts.)

Calculate your FSA number

The best way to determine how much money you should allocate to your FSA is with an FSA calculator. The calculator asks you to input a variety of information, including your income and estimated expenses for each category. After you input your numbers, you're shown exactly how much you should allocate based on your estimates. You also learn how much you could save on taxes.

For example, if you earn $45,000 per year and allocate $2,500 to your FSA for health care expenses, your estimated tax savings from your FSA is $812.

But here's the deal—in order to use the calculator to accurately estimate your health care expenses, you need to have an idea of what those expenses will be. If you just went through a big life change or are a first-time FSA user, that might seem difficult. Luckily, it's not as hard as it seems.

Here are some expenses you might want to keep in mind.

If you're a new parent…

Congratulations! If you're a new parent, your health care expenses will likely increase thanks to an uptick in doctors appointments and health-related items for your baby. In general, new parents should expect to increase their FSA allocation.

(Plus, this might be a great time to open a dependent care FSA to pay for eligible child care expenses.)

If you're recently divorced…

If you're recently divorced and don't have children, your health care expenses might decrease because you're only responsible for your own health care expenses now. The best way to find your allocation number is to review last year's expenses and calculate your new number based only on your own expenses.

However, if you're recently divorced and have children, your FSA allocation number might stay the same or even increase, depending on your custody arrangement. Also, if you're planning on paying for daycare for your children, it might be a good idea to open a Dependent Care FSA.

If you have a recent health diagnosis…

If you've recently received a health diagnosis and are unsure what your health care expenses will look like now, it might be a good idea to increase your FSA contributions. Even if you allocate an extra $50 per month, it might make a big financial difference throughout the year. Plus, you might spend some of the money on FSA-eligible products related to your diagnosis.

If you're a first-time FSA user....

Welcome to the club! If you're a first time FSA user, it might be challenging to find the perfect allocation number, but that's okay. Even if you only put $100 per month towards you FSA, you could save hundreds of dollars in taxes.

Do your best to calculate your contribution number based on last year's health expenses, but don't worry if it's a little low or high. Next year, you'll be able to calculate more accurately.

Bottom line

It's okay if you don't find your "ideal" FSA contribution number. The most important thing is that you're starting to save money in your FSA and prepare for your health care expenses. Your bank account will thank you.

Smart, eligible buys...

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From FSA basics to the most specific account details, in our weekly Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears every Wednesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


Real Money: Elder care and your DCFSA

As a parent, I'm always looking for the best ways to save money on child care — I talk to a lot of moms about this too. And if you're a parent, you may already know that a dependent care FSA or a DCFSA is a great way to save costs on child care expenses.

But did you know it could help aging dependents as well? As my parents get older, I can't help but wonder what would happen if they needed help. If you're in the same position, you should consider the DCFSA and whether or not you can save on costs by using pre-tax funds.

How does it work?

In order to claim reimbursement for qualified expenses for a DCFSA, you'll need a qualifying dependent. That means your elder dependent needs to live with you for a minimum of eight hours a day and be incapable of self-care. You'll also need to claim them as a dependent on your tax return.

Any expenses you wish to claim need to be related to caring for your dependent — these services are what allow you to attend school, work or actively look for work full-time.

As for how much you can contribute, it depends on how you file your taxes. If you're single or filing separately from your spouse, each of you can contribute up to $2,500. Those filing jointly can contribute up to $5,000, assuming each of you earn more than that amount each year.

If it's less, then you're limited to contributing to your DCFSA equal to the lowest earning spouse. For example, if you earn $10,000 a year but your spouse earns $4,000, then your DCFSA limit for the year can only be as much as $4,000.

Some qualifying life events will allow you the opportunity to change your DCFSA, such as changes in health care coverage, or if you suddenly need or no longer need elder care. It's best to contact your DCFSA provider if you're wondering about changes to your plan.

What counts as a qualifying expense?

According to the IRS, qualifying expenses are generally services that are primarily for the care and well-being on your dependent, whether it's in our out of your home. Qualifying care for your dependent must be to allow you and your spouse to work, go to school full time or to actively look for work. Medical expenses do not count as expenses for the DCFSA..

Some qualifying expenses include:

  • Adult day care center
  • Custodial elder care
  • Day nursing care
  • Elder care — in or outside the home
  • Transportation to and from eligible care — provided by the care provider
  • Registration fees required for eligible care

Remember you'll need to claim each of these expenses individually and provide proof of services. This may include medical documentation, receipts and other types of records — ask your DCFSA provider what's needed. It's better to have too much documentation rather than not enough. You don't want to be in a position where you can't claim your expenses.

Use your funds

Don't forget that you need you use up your DCFSA funds before the year ends or you forfeit the amount contributed. Your account may offer a grace period so you can spend down your funds, but that's not always the case. The best bet is to budget carefully for your elder care needs and check with your DCFSA provider on their specific rules and requirements.


Whether you budget week-to-week, or plan to use your FSA for bigger things, our Real Money column will help you maximize your flex spending dollars. Look for it on Tuesdays, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.


That's Eligible?! Spring break health essentials for teens and kids

Spring break is normally associated with long days at the beach and lots of sun, but for working parents the reality is much different. For parents with school-aged children, spring break is a hectic time when childcare is up in the air. Instead of spending eight hours at school everyday, kids are suddenly free for a week or two.

In other words, childcare is suddenly a concern. But there's some good news for parents with school-aged kids — your flexible spending account (FSA) and dependent care flexible spending account (DCFSA) might be able to help. Here's some things to know about spring break health essentials for teens and kids.

Consider day camps for children under 13

If your child is normally at school while you're at work, then spring break throws a wrench into your usual routine. Instead of panicking and hiring a babysitter, consider a day camp instead. Day camps can include anything from sports camps to learning how to code. Regardless of what your kids are interested in, you'll be able to find something that interests them. Plus, zoos often offer both day and night camps for kids.

The best part is that you might be able to use your dependent care flexible spending account to pay for it. Depending on your tax bracket, that might mean you'll get a savings of 20% or more on spring break camp expenses because you do not have to pay taxes on DCFSA-eligible expenses.

There are a few rules for using DCFSA funds to pay for day camps. For example, kids under 13 years old are eligible and the parent (that's you) needs to be working full-time, in school full-time, or trying to find a job. In other words, stay-at-home parents can't use a DCFSA to pay for day camps.

Make doctors appointments for your teenager

Whether it's a physical your kid needs for high school spring sports, acne treatment from a dermatologist or the annual checkup that's been forgotten, spring break might be the perfect time to get your teenager up to date on their appointments.

Even though you might have to take time off of work to go with him or her, you don't have to worry about coordinating your work schedule with his or her school schedule. Instead, you can make appointments for the time that suits you best. Plus, you can use your FSA for copays or prescription costs.

Get eye exams before the summer rush

A lot of parents wait until summer to schedule doctors' appointments, but the truth is that spring break is actually easier. It's a shorter time period and every school district is on a different schedule, so doctors' offices won't be as busy. If your child is due for an eye exam, or has complained that his or her glasses no longer feel right, then spring break might be the perfect time to visit an optometrist.

You can use your FSA to pay for the visit, and you can use it to pay for prescription sunglasses. Prescription sunglasses may seem like a luxury but they're a necessity for teenagers who have a driver's license, especially during sunny summer months, which are right around the corner.

Bottom line

If you're stuck at the office while your kids are on spring break, don't fret. There are plenty of FSA- and DCFSA-eligible ways for you to create a healthy and happy spring break for your kids or teens, and help you save money along the way.


Don't waste time hunting for ways to spend your tax-free funds. In That's Eligible?!, we'll bring you these updates every Monday, so you don't have to. And for all things flex spending, be sure to check out the rest of our Learning Center, and follow us on Facebook, Instagram and Twitter.


Asked and Answered: How does elder care work with a dependent care FSA?

If you're responsible for the care of your parents as an adult or another dependent adult loved one, you know that the costs associated with caring for them can take a toll on your wallet. If you have a dependent care FSA (DCFSA), you're probably curious as to exactly how reimbursing those cost might work and wondering exactly what expenses are eligible.

Who is eligible?

In order to claim reimbursement for elder care expenses, your dependent elder must live with you for at least eight hours a day, and they must be claimed as a dependent on your annual tax returns. They must also be incapable of self-care. All claimed expenses need to be related to care for the dependent, because they're the ones that allow you (and your spouse, if applicable) to remain at work, school or actively seeking gainful employment.

In other words, you can't be your elderly loved one's full-time caretaker while not working and still claim reimbursement of their expenses.

What expenses can be reimbursed?

As a caretaker, there are a lot of different expenses that you may encounter while caring for an elderly loved one. Your elderly loved one may need more advanced care such as a personal care attendant who comes in and assists with the functions of daily living - like bathing, taking medication, cooking, or just getting around from place to place.

They also may need assistance when getting to and from medical appointments, or even just running errands. As long as the dependent is unable to care for themselves, the cost of these caretakers is eligible for reimbursement.

Part of the cost of elder care expenses can also involve being placed in a care facility for a certain amount of time during the day because they can't be left alone for an extended period. So if you drop off your elderly loved one at an adult care facility or a similar program, you can claim these expenses.

In order for these expenses to be claimed, however, you'll need to claim each expense individually. It's important to note that you'll probably need medical documentation to claim these expenses. It's always a best practice to keep receipts and records of any expense associated with your DCFSA to avoid problems down the road (and we always advise speaking with your plan administrator on exactly what types of documentation you'll need ahead of incurring expenses).

What isn't included?

If an expense isn't directly related to the care of the dependent so that you can work or study, the expense won't be eligible for FSA reimbursement. That means you can't claim meals or supplies on your FSA. If the expense is directly related to extended medical care, such as full-time nursing home care or in an assisted living facility, those expenses will not be eligible under your DCFSA.

The most important thing to remember is that the care provided by any professional must be provided for the purpose of you being able to continue to work, study, or search for work. So if you were going on vacation and need somebody to care for a loved one full time while you're gone, you cannot claim those costs as an expense since it's at your leisure.

From FSA basics to the most specific account details, in our weekly Asked and Answered column, our team gets to the bottom of your most-pressing flex spending questions. It appears every Wednesday, exclusively on the Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.

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FSA Friday - 4/27/18 - Summer camp with a dependent care FSA? Yes, it's eligible!

Depending on where you live in the U.S., spring sure took its time getting here. But at our offices in New York City, this week represented 2018's first real taste of warmer weather. (We hope...)

We don't spend a lot of time covering dependent care FSAs on these pages, but summer is always a good time to see if this account is right for your family. Why? Because summer day camp is an eligible expense for dependent care FSA holders!

It seems strange to be thinking about cookouts and and camp songs on a site built around health and financial wellness, but the dependent care FSA is a great way for people to set aside tax-free money toward any relevant care costs -- including daycare and camp. And it looks like the warm weather has the media thinking about these things, too, based on the headlined below.

Camps & Schools: Affording Summer Camp - Marilyn Campbell, Connection Newspapers

A recent study by the RAND Corporation, a nonprofit, global policy firm, shows that voluntary summer programs like daycamp have a significant, positive impact on low-income students during a time when they fall behind their wealthier peers both academically and socially.

Their research also shows that children benefit from learning social and behavioral skills in different settings with new peers.

The problem comes from accessibility and cost. Many parents looking for assistance during the summer may not realize there are programs available to them to offset these expenses. The article suggests parents check to see if a camp participates in U.S. government assistance programs, as well as dependent care FSAs, which are eligible to cover day camps (overnight and sleepaway camps do not apply).

There may still be time to make this happen for the 2018 summer season. But if you miss out now, this is the perfect time to start planning for summer day camp expenses for 2019. And the next article discusses just that...

Open enrollment is a great time to think about summer camp - Kelli B. Grant, CNBC

Once we started thinking about how planning is key to maximizing our FSAs, we were reminded of a great piece from last year's open enrollment season, in which the author highlighted how a little foresight at open enrollment can offer a huge win come summer camp season.

While you might not be thinking about s'mores when holiday music is already being played in stores, there are some significant savings to be had the following year.

If you already have a dependent care FSA, you're likely aware you can set aside up to $5,000 in tax-free funds for child care expenses for 2018 (as long as the child is under 13 and both parents are either gainfully employed or seeking gainful employment). But if you were saving for summer expenses, chances are you needed to make that decision at open enrollment the previous year.

Camp and other summer child-care costs can be a big line item for working parents. Though prices vary, summer day camp programs accredited by the American Camp Association average $314 per week. Using a dependent care FSA can help parents save an average of 30% on these services, while also reducing your overall tax burden.

For the latest info about your health and financial wellness, be sure to check out our Learning Center, and follow us on Facebook, Instagram and Twitter.


Can I submit a claim to my dependent care FSA for children’s classes at Parks and Rec? i.e. tumbling/gymnastics, etc.?

By its design, a dependent care flexible spending account (DCFSA) is designed to allow workers to set aside pre-tax dollars to pay for eligible care expenses for a child, disabled spouse, elderly parent or other individual listed as a dependent who is physically or mentally incapable of self-care. Day camps, such as soccer, football, ballet, etc. are eligible with a DCFSA, provided that they enable the account holder to be gainfully employed, seek gainful employment or go to school full-time. Classes have the potential to be eligible, but on a case-by-case basis. If you can prove that these Parks & Rec classes allow you to work, seek work or pursue an education, they will most likely be covered by your benefit.