When open enrollment comes along, you’ll face a lot of important decisions. One of these decisions might be whether or not you should participate in a Flexible Spending Account, or FSA. If you’re not familiar with this benefit, you might not take advantage of it – but then you’d be missing out on big savings!
A Health FSA lets you contribute money from each paycheck pre-tax, into an account that can be used to pay for qualified out-of-pocket medical, dental and vision expenses throughout the year. By contributing pre-tax dollars to your FSA, you lower your taxable income — in other words, you pay fewer taxes and take home more money! For 2022, the limit you can set aside is $2,850.
If you’re already participating in a Health Savings Account, or HSA, you won’t be able to contribute to a full Health FSA at the same time, but you can enroll in a Limited Health FSA to save on qualified dental, vision and preventative care expenses.
A Dependent Care FSA is another great way to save! This account also lets you set aside pre-tax dollars, and these funds are used to pay for daycare expenses for children under age 13, or care for a disabled spouse or dependent.
What can I spend my FSA on?
There is a wide selection of health and wellness products which you can use your FSA savings for. Some are specific and some are widely used. Baby products, pain relief, first aid kits, all sorts of things!
Ready to enroll?
There are just a few key things you should know to make sure you’re getting the most out of your FSA.
First, money contributed to an FSA is use it or lose it. This means any funds left in the account at the end of the plan year are lost, unless your employer’s plan offers a grace period or carryover. It’s important to carefully estimate the amount you think you’ll spend annually on out-of-pocket medical expenses before you elect. Check out an FSA calculator to help you decide how much to set aside.
Once you have set funds aside in your FSA, using them is easy. You can simply swipe your benefits debit card if you have one, or you can pay for an expense out of pocket and request reimbursement from your FSA later via check or direct deposit. Just remember that some FSA transactions need to be substantiated. In other words, you need to show that what you paid for was an FSA-eligible expense by submitting documentation. If it’s a recurring expense or a co-pay expense that matches your employer’s plan, you’ll be able to skip this step.
An FSA is a great way to save money by lowering your overall taxable income and giving you tax-free dollars to put towards medical expenses. You will want to make the best estimate of how much to set aside, because the amount you can carryover year to year varies by plan.
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