What Is a Flexible Spending Account

What is a Flexible Spending Account? A Flexible Spending Account (FSA) is a great option for reducing your taxes as well as setting aside funds to cover medical and dependent care expenses. With this account, you contribute money from your paycheck each period, before taxes, and you can use that money to pay for certain health care costs.

Think about what medical expenses you might have next year. You can never be 100% certain, of course, but you can anticipate some expenses. For example, if your child's dentist says that he or she will need braces, try to get the dentist to be more specific as to whether that means in the next 6 months or in the next 6 years. Think about over-the-counter medications you and your family take on a regular basis. Don't forget to add up co-pays for prescription drugs and for regularly-scheduled checkups for each family member, as these are FSA eligible. You can save up in advance and enjoy the tax benefits later.

However, since your FSA contribution is locked in during your company's annual enrollment period, if you don't contribute enough, you will miss out on tax savings; if you contribute too much, you will have unused funds at the end of the year that you will lose forever. So, plan carefully!

In addition to allowing for anticipated expenses, you should try to "pad" your flexible spending account to cover any unforeseen expenses. The problem is that you will forfeit any unused funds, but there are several ways you can spend this money.

For example, you may want to get an eye exam if you haven't had one in awhile; however, scheduling an end-of-year appointment may prove difficult as many others will have the same idea. If your New Year's resolution is to stop smoking, don't wait! Smoking cessation expenses are eligible on many plans. Restock and replace expired meds in your medicine cabinet and first-aid kits and swap out those Barney the Dinosaur bandages if your youngest child is over the age of five. Be sure to check your plan to see which medications are allowed and keep all receipts. Many pharmacies now total all FSA-eligible expenses somewhere on their receipts to help you with the math. The government now allows a grace period, but not all plans offer this, so be sure to ask.

Study your plan's rules and eligible expenses as you plan your contributions. These rules should be available on your provider's website, or ask your company's HR representative for a copy. Your provider may also have an FSA savings calculator or you can find one through a search engine.

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Flexible spending accounts (FSAs) allow you to set aside pre-tax income now in order to spend it later on anything ranging from ointments to operations. To help you make a well-informed decision about flexible spending accounts (FSAs), this guide explains how they work, describes the different types available, and provides an overview of the rules you'll need to keep in mind when managing a flexible spending account (FSA).

The primary benefit of a flexible spending plan is that if you use it you realize a substantial tax benefit. Along those lines, the key drawback is that if you don't use the money within a certain coverage period, you will likely lose it.

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Many employers offer flexible spending accounts to offset the burden of un-reimbursed medical expenses, including co-pays and treatments that aren't covered by your medical insurance. However, flexible spending accounts can have a downside, so it's important to evaluate your position before you sign up for a flexible spending account.

Associated Content writer Kendra Dalstrom mentions in her article about rising healthcare and the many problems that we cause to help the state of healthcare America. She mentioned Americans have helped healthcare costs to skyrocket within the last ten years, but realistically it has been rising for more than a decade.

A health flexible spending arrangement (FSA) is an account that is funded by voluntary salary deductions agreed upon with your employer. When you sign up for a health care flexible spending account, you are agreeing to set aside a certain amount of your salary or wages to pay your medical and dental expenses that are not covered by insurance.

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