Happy Friday, everyone! This week, I'm stepping in for Sean while he enjoys some warm weather fun a few months ahead of spring. And, while the warmer temps of mid-April seem like they're light years away, tax season is already here. This means the media discussion of personal finance and healthcare savings is in full swing.
This week, let's take a look at a few of the many headlines populating our news feeds, and see what's trending in the ongoing personal healthcare and tax discussion.
Analysis: The tax benefits of a health savings account - Thomas Heath, The Washington Post
This time of year, mainstream media outlets offer up a lot of "overview" discussion on flexible spending accounts (FSAs) and health savings accounts (HSAs). But few of them open as directly as Thomas Heath, who says, "Any time you can protect your money from the tax man, I want in."
Using real-life examples of conversations Heath had with his wife and his employer's human resources department, Heath offers a quick, succinct breakdown of each type of account, what the common misunderstandings are, and what the tax ramifications might be.
Though there are much more thorough resources to be had about your flexible spending tax options (starting right here and here), this piece does a good job whetting your appetite for deeper discussion.
Do workers saving in both 401(k)s and HSAs end up cannibalizing one account for another? - Marlene Y. Satter, BenefitsPro
With so much of today's personal finance discussion focused on putting aside retirement money, while also paying down current medical bills, this BenefitsPro article is perfectly timed. According to the author, a recent study shows that workers who put funds into both a 401(k) and a health savings account are saving more overall than those who just put money into a single account.
She goes on to dispel some common myths about whether saving to one type of account could cannibalize potential savings to the other.
Note: Viewing the entire article requires you to set up a free BenefitsPro account, but we recommend doing so, since the author does a good job breaking down trends and figures about these accounts, contribution analyses and more.
Fewer than half of parents take advantage of this money-saving tax break - Leslie Albrecht, MarketWatch
Here's a sobering thought from this MarketWatch article: Parents could save more than $2,000 a year on child care costs, but more than half leave the money on the table, according to a survey of 1,100 parents by Care.com.
Here's another one: While most parents (67%) know they could save on child-care costs with a tax break called the dependent care flexible spending account, only 44% actually use one.
In this piece, author Leslie Albrecht points out potential sources of child-care tax savings that you can get, even if you don't have a dependent care FSA. And if you do, she also explains how these account holders can still take advantage of the federal child-care tax credit. It's a worthy read for any parents seeking a break from rising daycare costs, and seemingly unforgiving tax scenarios.
Tax season can be a complicated time, but we're here to help. For the latest about your health and financial wellness, you can turn to our Learning Center, Facebook, Instagram and Twitter pages for the info you need to #GetFlexSmart.
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.
FSAstore.com Reminds Consumers this Tax Season: Enroll in a Flexible Spending Account (FSA) and Save Up to 40 Percent on Medical Expenses
Consumers can save up to $1,000 a year with an FSA
New York, NY (PRWEB) April 07, 2014
FSAstore.com, the only e-commerce site exclusively stocked with Flexible Spending Account (FSA) eligible products, is reminding consumers to take advantage of sizable annual health care savings with an FSA. More specifically, enrolling in a pre-tax FSA and contributing $2,500 to the account could result in savings up to $1,000 annually. That's the equivalent of up to 40 percent savings on each dollar contributed to an FSA.
“With an FSA, consumers can reduce their taxable income while enjoying large tax savings on out-of-pocket expenses throughout the year," said Jeremy Miller, FSAstore.com CEO and Founder. “An FSA can help cover expenses including doctor co-pays, dental and eye exams, and practical, everyday health care products such as first-aid kits, blood pressure monitors, heat wraps, and breast pumps."
Additional tips to help maximize your FSA:
1. Contribute wisely. Use an online FSA calculator to plan FSA savings and anticipate potential FSA expenses.
2. Learn what's covered. Many consumers do not realize the breadth of products and services covered by an FSA and fail to spend down their account balance. To make the most of your FSA dollars, browse available FSA eligible expenses.
3. Maximize contribution limits. You can contribute up to $2,500 to a Health Care FSA, but you can maximize your contributions if both you and your spouse contribute to separate FSA accounts. In this case, you and your spouse can contribute a total of $5,000 a year. You can also contribute $5,000 per household to a Dependent Care FSA, or $2,500 if married and filing separately.
4. Know your FSA types. If you have children, you could use both a Health Care FSA for medical expenses and a separate Dependent Care FSA for childcare or adult dependent care needed to allow you and your spouse to work, search for work, or attend school full-time.
5. Take care of eligible dependents. Use your FSA to pay for expenses for your tax dependents or your children through the age of 26. Per HealthCare Reform, children through the age of 26 do not need to be your tax dependent.
6. Keep track of qualifying events. Some life-changing "qualifying events" (such as marriage or the birth of a child) may allow you to change your FSA contributions during the plan year. Check with your FSA administrator if you think this applies to you to be sure that you're taking full advantage of your contribution potential and eligible expenses.
7. Track health care payments. If you used an FSA debit card during the year to pay for expenses, you usually will not need to submit a paper claim. If you did not use a debit card, be sure to submit claims with receipts for all FSA eligible expenses, so that your FSA administrator can process your claim promptly.