While it's almost April 15, and you may still need to get your taxes done...one item you won't need to worry about is your Flexible Spending Account (FSA).
While it's almost April 15, and you may still need to get your taxes done...one item you won't need to worry about is your Flexible Spending Account (FSA). Luckily, youdon't need to worry about your Flexible Spending Account or do anything extra when it comes to taxes and your FSA.
But, do keep in mind the tax savings with your Flexible Spending Account, which you'll be able to enjoy during the year.
Flexible Spending Account Savings
1. An FSA is Tax-Free!
Your exact savings depend on the amount you set aside with your FSA, and what your tax bracket is. Typically, savings are around 40% on money you put in your FSA. Check out our FSA Calculator to estimate how much you could save.
2. Use for Expenses Not Covered By Insurance
An added perk of a Flexible Spending Account is the ability to use this account for medical services which your regular insurance may not cover - including alternative medical providers like chiropractors, acupuncturists, and more.
You can, however, also use your FSA for typical medical expenses like:
Dental care: Braces, dental cleanings, fillings, bridges, and denture products
Cancer screenings, body scans, and lab fees related to medical care.
Medical fees like co-pays, deductibles and co-insurance. Premiums are not covered by an FSA.
Counseling for a medical or mental condition
Dependent Care FSA expenses:
Medical expenses for a disabled dependent are eligible. Under a Dependent Care FSA, expenses for care of a disabled dependent are eligible provided that the care is for a qualifying dependent.Expenses for a disabled person, such as a wheelchair, braille books and magazines, a guide dog and special medical care, are eligible.
Many healthcare products you use everyday can also be purchased with your pre-tax FSA. If you wear contact lenses, you can buy these and contact lens solution with your FSA. The items in your first-aid kit are also FSA eligible. Pain relief hot/cold therapy packs to treat sore muscles or other aches are also covered with your account.
Check out our wide selection of products you can buy at FSAstore.com and save!
Workplace benefits like Flexible Spending Accounts (FSAs) are well-known for their ability to cover a wide variety of medical services and products, but they can also provide a major boost for employees through year long tax savings. With April 15 (Tax Day) on the horizon, now is a great time of year to discuss the many tax benefits that come with FSAs and how they can put more money back into your pocket and alleviate your concerns when medical expenses pop up. Learn more about FSA eligible expenses via FSAstore.com.
How do FSAs affect my tax earnings?
According to Bank Rate, the vast majority of companies will offer one of two FSAs – a Dependent Care FSA that covers costs like day care and other child-related expenses while parents can work, look for work, or attend school full-time, and a medical FSA that covers routine medical expenses. In both cases, money is taken out of your salary with payroll reductions each month on a pre-tax basis. Simply put, these funds are placed into an FSA on a pre-tax basis, reducing taxable income and providing more savings in the long run.
Do I need to do anything extra around tax time?
While there is a lot of jargon and conflicting information out there, filing taxes with an FSA is extremely easy. It's important to remember, while you can use your FSA for countless medical products and services, the account is not really yours, but the employer's. While you don't need to add anything specific to your tax return, you should be mindful of how much money is available in your FSA, as well as what you'd like to spend/carry over to the next year.
Currently, employees can allocate up to $2,500 per year in their FSAs. If the FSA runs on a calendar year basis, FSA holders typically have a deadline to use their funds by December 31, or if an employer utilizes the IRS's grace period, this is extended to March 15. It's important to note that these grace periods are not required by the IRS, so it's vital to check with an employer to see if this policy is in place. Last but not least, thanks to a new U.S. Treasury Department ruling, employees may be permitted to roll over up to $500 of their FSA funds to the next year, which can allow them to better plan their spending each year.
Can I itemize my FSA expenses?
According to Tax Brain, employees who have an FSA can itemize their deductions come tax season, but they will not be able to apply their FSA expenses when itemizing. Remember, this money has been placed in the account on pre-tax basis, so this would be considered double-dipping. Another key point to remember is that medical expenses must be at least 10 percent of your adjusted gross income (AGI), to qualify as deductions.
Ultimately, by staying on top of your FSA funds, being aware of employer policies and spending wisely, FSAs can be extremely beneficial for your long-term budget. An FSA will change little when it comes time to file a tax return, but utilizing the benefit throughout the year and being mindful of allocations can help you realize major tax savings each year.