There's no doubt that the gig economy is growing. About 11% of U.S. workers are full-time contractors, according to Nation1099. Freelancers are also on the rise. Popular freelancing platform Upwork's report that 57.3 million people in the U.S. freelance full time.
And one of the reasons for this steady surge toward home-based employment? Parenting and child care, and the ability to make your own hours to accommodate for a growing family's always-hectic schedule.
A quick note on freelancing vs. contracting
A few weeks ago, we discussed the availability of FSAs to freelancers. But there's an important distinction to be made between freelancers and contractors. Freelancers work for themselves, often doing work for various clients simultaneously. A contractor usually has a signed contract with one client to perform a specific role for a set period of time.
If you're a contracted worker, chances are, you enjoy the freedom that comes along with working when you want, where you want, or even moving on when the work no longer interests you.
Let's start with the answer you want
Unfortunately, the IRS says that self-employed workers aren't eligible for FSAs. I know, that hurts a bit. If you have a spouse that's eligible for an FSA through their employer, they should consider opening one, since you and any dependent children are also eligible to use those funds.
There are other options (especially if you have children)
There's good news for those with children: If your spouse can give you access to an FSA, you can use your FSA to pay for approved over-the-counter medical items like contact lens solution, nasal spray, breast pumps and accessories, and even copays. Items containing an active medical ingredient like acne medication, sleep aids, and allergy medication are also eligible with a valid prescription.
You can also consider a dependent care FSA, which can be used to pay for childcare for a child 12 and younger. Specifically, summer camps, preschool tuition, and daycare to name a few.
Finally, you might want to consider opening an HSA if you're self-employed and currently enrolled in a high deductible health plan (HDHP). HSAs are similar to FSAs in that they cover medical expenses like OTC medicine, prescriptions, and copays.
Worth noting: Generally, you can't have both an HSA and an FSA (with limited exceptions).
The child tax credit (CTC) and the additional child tax credit (ACTC) can also help offset the cost of childcare. These tax credits are up to $1,000 per qualifying child. The child must be under 17, have lived with you for at least half of the tax year, and be a U.S. citizen.
Worth noting: If you feel you have been improperly classified as an independent contractor and should be an employee, you may be eligible to change your status with your employer and gain access to benefits like an FSA.)
So be sure to explore your tax advantaged options when it comes to defraying the cost of childcare. Because let's face it: Even home-based workers need a little help sometimes.
Whether you budget week-to-week, or plan to use your FSA for bigger things, our weekly Real Money column will help you maximize your flex spending dollars. Look for it every Tuesday, exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.
Lowering the cost of healthcare is a smart move, no matter how you look at it. Aside from paying lower premiums and taking care of your overall health, many people take advantage of tools that help make their health care costs tax deductible. These include a health savings account (HSA) and a flexible savings account (FSA).
Even though they're referred to interchangeably, these are very different types of accounts. Both HSAs and FSAs are similar in that they help you make qualified health purchases using tax-free funds. But with limited exceptions, you can't have both. This means if you want to take advantage of your employer's flexible spending account, you may not be able to contribute to your HSA.
There are some instances in which you may be able to elect both accounts at once. You can technically have both if you have a certain type of FSA and meet the qualifications of an HSA.
Run of the mill just won't do
First, let's quickly go over what you need to qualify for an HSA:
- You're currently covered under a high-deductible health plan (HDHP)
- This plan has an minimum annual deductible of $1,350 or $2,700 for families
- Your plan has an annual out of pocket maximum of $6,750 (or less) or $13,500 for your family
- You aren't currently on Medicare or supplemental health care plan (including a spouse's employer- sponsored plan)
- You're not considered a dependent under anyone else's tax return
- You're not covered under other disqualifying health coverage, including yours or your spouse's enrollment in a traditional FSA
An FSA counts as "other health coverage," according to IRS Publication 969. So your run- of- the- mill FSA will probably not be compatible with an HSA. And it's important to note that if your spouse elects an FSA that's not compatible with an HSA, your ability to contribute to an HSA goes out the window, as you're technically considered covered under that FSA (whether your spouse adds you as a dependent to the plan or not).
If your employer offers either a limited-purpose health or a post-deductible health FSA (also referred to as an "HSA-compatible FSA"), start celebrating! It means you can have an HSA alongside your FSA. And who doesn't want more tax-free spending on qualified medical expenses?
It doesn't have to be confusing...
Before running off and opening an FSA alongside your HSA, make sure you understand the pros and cons of each. Look carefully at your lifestyle to see if it even makes sense. You want to know if you'll be able to use up your FSA funds as you'll lose them after the end of the plan year (with the exception of those with deadline extensions or a $500 rollover).
This type of account typically only allows you to spend money on qualified dental and vision expenses. The account can also be used for your spouse and qualifying dependents including children through the age of 26.
Let's say your spouse goes to the dentist only to find out he needs a root canal within the next few months. It might make sense to contribute to a limited-purpose FSA because you can save your HSA funds for something else. You can then make a contribution to your limited-purpose FSA for the root canal.
Remember to check with your plan administrator or HR department about all of the details of your plan, including which plan will automatically pay first. If the plans are set up so that your HSA funds are withdrawn first, you may want to see if it's possible to have FSA-eligible expenses withdrawn from the FSA first, or if you'll have the ability to request that they be transferred from the HSA to the FSA.
This isn't a common type of FSA. Before you hit your minimum deductible for the year, expenses are limited to dental and vision only with this account. Once you hit your minimum HSA deductible for the year, you can use the money from the post-deductible FSA account for all qualified medical expenses.
Just remember that if you reimburse an expense from your HSA, you can't also do it with your FSA.
So, let's say your minimum deductible is $2,700 for your family in your HSA. You can still access your post-deductible FSA for any vision and dental expenses until you reach $2,700 in expenses incurred that apply to your deductible. This plan would make sense to those who anticipate vision and dental expenses, or expect to set aside more than the HSA will allow.
Yes, you can have an FSA with an HSA
As long as your employer offers either a limited-purpose or post-deductible FSA, you can keep your HSA with no issues! Remember, FSA funds disappear after the plan's year is over with a few exceptions, so make sure you'll definitely use that money before making any contributions.
If so, you can let your HSA contributions compound and grow while still being able to take advantage of tax-free medical spending.
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 FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.
For many people, FSAs provide an element of security when it comes to handling health care costs. The tax breaks that come along with them are an added bonus.
But FSAs are usually talked about in terms of a health plan through a standard employment arrangement, which leaves many of you out there who are self-employed wondering: what about me? Let's deep dive into the nuances of FSAs for the self-employed so that you know what your options are.
Self-employment and FSAs
FSAs are special types of accounts that allow employees to contribute money that can later be used for out-of-pocket healthcare costs like copayments, deductibles, and prescriptions.
This money is not taxable, which means you'll save the same amount of money that you would have had to pay taxes on, which is a nice little bonus. Employers also have the option of making contributions to an FSA.
The drawback with FSAs is that if you're self-employed, you're not currently eligible to open an FSA. Only permanent employees working for a company that offers an FSA option can enroll in the program. You can however set up an FSA for your employees and save on the Social Security and Medicare taxes for contributions your employees make to the plan.
Because of the way that FSAs are set up, if you're self-employed, you'd be making contributions to yourself, which isn't allowed. Current laws don't allow you to pay yourself by depositing money in an FSA, but there's hope, thanks to another way to get your tax break!
Tax-free funds for the self-employed
The good news is that if you're self employed, you do still have options to help defray the costs of your healthcare, including setting up a health savings account (HSA). While an HSA is very different than an FSA, its benefits – and the way it's set up – have some similar traits and tax-savings.
With an HSA, you can use the money for physicals, check-ups, prenatal care, immunizations, weight loss programs and screenings for cancer, heart disease and vision and hearing disorders.
To open an HSA, you:
- Must be enrolled in a high-deductible insurance plan (HDHP)
- Can't be enrolled in other medical coverage, including Medicare
- Can't be claimed as a dependent on someone else's tax return
To meet the "high-deductible" requirement, your deductible must be between $1,300 to $6,500 per year for an individual, and $2,600 to $13,000 per year for families.
Other important things to know about HSAs include:
- Contributions are tax-deductible
- Your contributions earn tax-free interest
- Qualified distributions from your HSA are tax-free
- You can invest your contributions in stocks, bonds, and mutual funds
- Your funds don't expire, so your money rolls over every year, which isn't a feature of FSAs
One last thing to keep in mind about HSAs is that as of 2017, you can only contribute a maximum of $3,400 annually for individual coverage, and $6,750 for family coverage. If you're 55 or older, you can contribute an additional $1,000 to your individual or family plan.
If you're self-employed and always wanted to enjoy the same tax savings as your friends with FSAs, take another look at opening a health savings account! The accounts might be different, but the same tax-free funding is there to help with all your medical needs.
New to FSAs? Need a refresher course in all things flex spending? Our weekly Flex-Ed column gives you a weekly dose of FSA Living 101, offering tips for making the most of your tax-free funds. Look for it every Thursday, exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.
The headline says "5/4" but we bet more of you are going to celebrate tomorrow, when most of the country will put down their responsibilities and raise a glass to the Mexican Army's difficult victory over the French Empire on May 5, 1862.
(Rumor has it, there might also be some heavy partying.)
No matter what you have for going on this weekend, your FSA can help you ensure your celebration starts safe and stays safe. It might even help you enjoy May 6 as much as the previous day! In this week's FSA Friday, we put aside the news headlines to give you a few tips for enjoying a comfortable, relaxing, FSA-eligible Cinco de Mayo weekend.
It seems like just a few weeks ago, most of the country was still facing the possibility of snowfall. Today, the northeast United States is, once again, preparing for summer-like temperatures, clear skies, and perfect barbecue weather.
But it's been a long winter, and much of the country has been stuck indoors. So, it's probably best to avoid too much sunshine on the first warm weekend since September. Whenever possible, sit down in the shade, don't overexert yourself, and have that sunscreen ready. However, if you find yourself getting a little too much sun, we're happy to report that cold packs and other forms of cold therapy are FSA-eligible.
The Skin Cancer Foundation recommends using these products to treat sunburns soon after you come out of the sun to fight the itching and burning from sunburns, as well as reduce any unwanted swelling and blisters.
(We like using them to just cool off, since they're drier and longer-lasting than damp towels or ice bags.)
Stay hydrated (inside and out)
I don't think we need to remind you how important it is to drink plenty of water (and no, beer, sangria and Coke Zero do not count toward your daily water requirements). Whenever you're outdoors and the temperature rises, you'll need to keep the water flowing, regardless of whatever else you're doing, eating or drinking.
In warmer weather, your skin needs some extra hydration, too. Even if you don't get a full-on sunburn, there's always the possibility your skin will crack and peel. Medicated moisturizers that are fortified with aloe vera are FSA-eligible with a prescription! Applying twice a day after being outdoors can help fight off gentle burns, and prevent your skin from drying out.
Ditch the itch
You aren't the only one looking forward to that outdoor fiesta. Bugs have been dormant all winter, and have likely planned their first summer meal at the same time as yours. But you can put the brakes on the buffet by using FSA-eligible sunscreen with bug repellent before stepping into the yard.
Should a few insects fight through the bug spray, it's a good idea to treat bites right away using hydrocortisone cream, which should immediately treat inflammation, redness and swelling before they happen.
[PRO TIP - Hydrocortisone is also fantastic for reducing sunburn swelling and burning. Have it in your bag, no matter where your weekend takes you.]
Don't be too proud
Okay, after a day full of food, drink, sun, bugs and sprays, you might not feel quite like yourself once the sun sets on Cinco de Mayo. But, rather than try to ignore the pain, allow yourself to enjoy a little relief while you wind down the weekend. Over-the-counter pain relief like ibuprofen and aspirin (along with a lot more water consumption) should help take the edge off the previous day's celebration. And they're FSA-eligible with a prescription, so use our Prescription Process to make it even easier!
FSA Friday is a weekly roundup of the latest topics, tips and headlines to keep you updated on all things flex spending. It appears every Friday, exclusively on the exclusively on the FSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook, Instagram and Twitter.
If you are like many people with FSAs, the end of the year deadline can bring with it a mad rush to spend your leftover funds, so you don't lose them. This tax-free money is a great way to cover qualified health-related spending, while enjoying savings on taxable income. But waiting to spend right before the deadline might just lead to losing the funds if you're not careful.
For 2018, use these simple tips to plan ahead with your FSAs. As you'll learn, they don't have to be a year-end burden -- in fact, they're opportunities to save on the products you need, with the tax-free money you've already set aside year-round.
Make a spending plan your New Year's resolution
If you head into a new tax and employment year understanding what your paycheck contributions will be for your FSA account, you already have a key piece of planning in place for knowing how much you have available to spend in any given month.
The FSA contribution limit in 2018 will be $2,650, which comes out to about $221 per month.
If your medical expenses are straightforward, here are two easy rules of thumb for choosing an FSA amount:
- If your out-of-pocket medical bills typically amount to $221 a month or more — or roughly $2,650 a year — consider contributing the maximum to your FSA.
- If you don't contribute the maximum, consider adding $200-300 per month.
- If your medical expenses are lower, calculating the total of your estimated copayments, dental and vision expenses for next year should cover your needs.
And you probably don't want to try and zero-out your FSA funds on a monthly basis so your account does have some money available for unexpected expenses. Like when your entire extended family catches a seasonal flu … at the same time … and requires a huge amount of over-the-counter decongestants.
What you can do is take stock of FSA-eligible items you know you purchase regularly from basic medicine cabinet restocking or maybe just a replacement of reading glasses that get lost like clockwork.
The goal with a spending plan is to prepare regular purchases in advance on a regular basis – maybe monthly, maybe every other month or even just quarterly – which figure into your regular FSA fund contribution levels, while leaving some room for unexpected emergencies.
Avoiding the end-of-year crunch
This way you will be consistently spending that money that has the yearly use-it-or-lose-it deadline on items you know you'll be needing throughout the year anyway. Doing so will avoid a total crunch at the end of next year and will keep your contributions going toward FSA-eligible products.
Anyone making that end-of-year mass purchase right now is probably thinking back on the number of items that were bought out of pocket that could have been purchased using FSA funds with a little more planning.
In fact, if you're scrambling to spend this year's FSA contributions before the deadline hits, once that task is complete take a few more minutes and put together a spending plan for next year.
You've already put thought into what you regularly need and done the research on different products that are FSA-eligible. There are probably a few in the mix you didn't even realize qualified for FSA spending. Check out our eligibility list for a complete listing of FSA-eligible products and services.
It's your money. Use it to ensure continued health and wellness for 2018 and beyond.
Health Savings Accounts (HSAs) maximum contributions will increase by $50 for individuals with an HSA in 2017. Read more about HSA Maximum Contributions.
Similar to FSAs in that they're also tax-free plans, HSAs allow you to set aside pre-tax money to cover qualified medical expenses. That money is exempt from federal income tax, FICA and state income taxes (most states). The money stays in your account similar to a savings account and you even interest on the savings. HSAs can be used for qualified medical costs and out-of-pocket medical expenses, ranging from co-pays to over-the-counter medical items and more.In order to getan HSA, you must be enrolled in a qualified High-Deductible Health Plan and have no other first dollar coverage - this can include a general purpose FSA.
Here's theBreakdown of Expenses andInformation About HSA Maximum Contributions for 2017:
- HSA contributions for individuals (self-only coverage) thatcan be made in 2017 will go up by $50 to $3,400 from $3,350.
- Maximum contributions for anyone with family coverage will remain the same at $6,750.
- According to the IRS for 2017, a high deductible health plan is defined as "ahealth plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,550 for self-only coverage or $13,100 for family coverage."
To read more about the IRS announcement, go tohttps://www.irs.gov/pub/irs-drop/rp-16-28.pdf
Do you have a Health Savings Account? Did you know you can buy everyday health items like eyeglasses, contact lens care, hot or cold packs, breast pumps and more with an HSA?
Shop for everyday health products with your HSA at HSAstore.com
You can participate in a tax-advantaged Health Savings Account and cover qualified, out-of-pocket medical expenses if you are enrolled in a qualifying High-Deductible Health Plan. You, your employer and even family members are allowed to contribute to your HSA, but combined contributions cannot exceed the allowed IRS maximum per year as outlined below.
Maximum HSA Contributions:
In 2013: $3,250 for an individual; $6,450 if participating in the HDHP as family
In 2014: $3,300 for an individual; $6,550 if participating in the HDHP as family
If you’re 55 or older, you may contribute an additional $1,000.
You can use your HSA for qualified medical costs such as over-the-counter products and out-of-pocket costs toward health services including co-pays, co-insurance and deductibles. Shop for HSA-eligible items at FSAstore.com!
Consumer-Driven Health Plan (CDHPs) popularity is growing. According to new research by Aon Hewitt in its 2013 Health Care Survey, CDHPs are the second most popular plan offered by employers, and more employers plan to offer them to their employees in the future. Aon found that CDHPs are second behind preferred provider organizations (PPOs) and could beat PPOs in popularity in the coming five years.
As their name suggests, CDHPs give employees more flexibility and power in handling their health care. Consumer-driven health care combines a high-deductible health plan with a health savings account (HSA) or health reimbursement account (HRA) to pay for routine health care expenses. Plan contributions are pre-tax and can either be funded by the employer, employee or both. Unused balances roll over year-to-year in an HSA so that employees can use them toward future expenses.
Aon surveyed around 800 large and mid-size U.S. employers.
Some key findings from their survey:
- 56% of employers currently offer CDHPs
- 30% are considering offering CDHPs in the next 3-5 years
- 10% of employers offer CDHPs as the only plan option
- 44% are considering offering CDHPs exclusively in the next 3-5 years.
CDHPs also contributed to lower costs for employers in 2012, with employers reporting a “2 percentage point lower cost trend" (4%) as compared to other plans such as PPOs (6%), HMOs (7%) and Exclusive Provider Networks (6%).
"With many of the operational details of health care reform yet to be implemented, employers are confronting the realities of compliance and the significant challenges they face in controlling future health care costs," said Maureen Fay, senior vice president at Aon Hewitt. "Employers are increasingly embracing plan designs that are cost-effective, promote consumer choice and accountability, and encourage employees to be more deliberate in how they spend their health care dollars."
Taking Control Of Health
Employers are encouraging CDHP enrollment by making these plans a default plan option, or even subsidizing premiums at a higher level than for other plans (44%). CDHP enrollment also revealed that consumers are satisfied with these plans and plan to re-enroll. Aon found 97% percent of employees enrolled in a CDHP for more than two years plan to re-enroll. Aside from a general high satisfaction, consumers also felt they made more “informed health decisions," as 66% of those enrolled said they made “positive behavior changes related to their health." Among these positive behavior changes were increased routine preventative care (28% of respondents reported this) and 19% researched health costs more often.
"Effective consumer-driven health plans are designed to help change employee behaviors by encouraging employees to make better informed health care decisions and to take ownership for actively managing their health through prevention and lifestyle choices," said Jim Winkler, chief innovation officer for Health & Benefits at Aon Hewitt. "Incentives also play a critical role in motivating employees to change behavior. Initially, extrinsic incentives help engage employees in focusing on behavior change. Over time, as healthy behavior patterns start to stick and employees feel good about the results they have achieved, employers can shift their focus more toward intrinsic motivators."
By giving consumers more control over their health care, the hope is that that might increase their understanding of available coverage, too. A Kaiser Family Foundation poll found 51% of Americans feel they don't have enough information about the Affordable Care Act (ACA). They're interested in hearing about costs associated with the law as well as looking for a simple summary of how the law works and how it might affect them. Kaiser also reported that people think coverage of the law has been overly politicized rather than giving enough practical details about the law.
We'll keep you posted on more health care reform news right here on the FSAstore.com blog.
It’s open enrollment time at many companies. Does your company offer a High Deductible Health Plan (HDHP)? If so, have you ever considered a Health Savings Account to help you pay for your out of pocket medical expenses?
A Health Savings Account (HSA) is similar to a Flexible Spending Account (FSA) in that it allows you to put aside pre-tax funds for qualified medical expenses. An HSA is exempt from taxes including federal income tax, FICA and (often) state income taxes.
The HSA 101
You must be enrolled in a qualifed HDHP to have an HSA
Most accounts earn interest on savings
Your employer or family members can contribute to your HSA
Can be used for deductibles, co-pays and co-insurance
Can be used for over-the-counter products and medicines (require a prescription)
HSA money rolls over year to year
You may contribute up to the allowed maximum, adjusted for inflation each year
- 2013: $3,250 per person; $6,450 per family
- 2014: $3,300 per person; $6,550 per family
If you're 55 or older, you may contribute an additional $1,000.
How is an HSA different from the FSA?
HSA funds roll over whereas with an FSA your contributions much be used by end of year – or they are forfeited. You own the HSA so even if you change jobs or are no longer covered under an HSA-eligible HDHP, you can keep spending down your HSA or save it for future expenses.
Can I use an HSA at FSAstore.com?
Absolutely! Products that are eligible for FSAs are also HSA-eligible.