A Flexible Spending Account (FSA) allows you to save money on health care expenses by allocating pre-tax dollars into an account that’s maintained through your employer.
You typically designate a portion of your paycheck to be deposited into your flexible spending account each pay period. Then, after you incur eligible medical related expenses (like doctor visit co-pays, prescriptions, over-the-counter health products, dental expenses, orthodontics, optical care, etc.) you submit receipts to your account administrator, and your expenses are reimbursed with the pre-tax dollars from your flexible spending account. Since contributions for an FSA are taken out of your pay before taxes are applied, using your FSA reduces your gross salary and your taxable income. You save the tax you would otherwise pay on the income you earn that you use for eligible medical expenses, and the savings can really add up.
However, be careful not to allocate more than you will spend to an FSA, as any funds not claimed via eligible expenses during the calendar year will be forfeited.
While it’s true that you can take a deduction on your income tax for medical expenses, according to the IRS only medical and dental expenses that exceed 7.5 percent of your adjusted gross income can be deducted from your income taxes. Most people don’t have expenses high enough to qualify for this deduction, so being able to use a flexible spending account is advantageous.
If you’ve deposited funds into your FSA for this year and you haven’t had enough eligible expenses yet to add up to the total amount you’ve allocated, you’ve got about a month left to do so. Don’t forfeit that money!
Remember that FSA eligible expenses include over the counter products such as band-aids, aspirin, cold and allergy medicine, and so on. If you have no planned eligible medical expenses for the remainder of the year and still have some money in your FSA account, rather than forfeit the FSA money, I recommend you stock up on over the counter products you and your family use. If you have any questions regarding which products are FSA eligible, search for the products on the Walgreens.com web site, as their web site indicates whether each product is FSA eligible, and double-check with your plan administrator since they are the ultimate authority on eligible expenses.
Make your Flexible Spending Account work to save you money!