Every year around Christmas, my husband asks me the same question. "How much do you want me to put in our FSA account this year?" This is usually followed by one of my long, exhaled sighs and an "I don’t know" shrug of the shoulders.
After suffering root canal failure two years ago, I had to do some extensive research into our FSA, as well as the upsides and downsides of this type of account.
Here are the basics that you should know:
• FSA is known as flexible spending account or flexible spending arrangements.
• FSA accounts are available only through job-based health plans.
• FSA money is not taxed. These funds are deducted from your paycheck and transferred to your FSA account.
• $2500 dollars is the annual FSA limit.
• FSA dollars cannot pay insurance premiums.
FSA dollars do not roll over into the next year. However, your employer may allow ONE of the exceptions, which include the following:
• 2.5 month grace period to use the money
• $500 maximum carry over into the next year
FSA funds can be used for medical and dental deductibles, as well as expenses. For example, I suffered from root canal failure two years ago and my husband added $2500 dollars to this year’s FSA account to pay for a dental implant.
Last year, we only incorporated $500 dollars into our FSA account and this paid for our prescription eyeglasses.
A big question that people with FSA accounts have to ask themselves every December is how much should I incorporate into my FSA account next year?
While you may never be able to predict the exact amount you will need, it is key to remember the following:
If you are over 50 or have a family, you may want to deduct more for tests (i.e., colonoscopy, physical therapy), medications, eyeglasses, and minor out-patient surgeries like a root canal or dental implant.
If you under 50 and in good health, you may want to consider a $500 FSA account to pay for deductibles, dental visits, and eyeglasses, as well as prescription sunglasses.
It is important to note that expenses like teeth whitening and plastic surgery are not covered by FSA dollars and those will have to be paid by your disposable income dollars.
For a full list of what is covered by FSA funds click here.
Planning ahead by using FSA dollars can save you money and financial heartache down the line.
Sources:
"Tax Time: Flexible Spending Plans versus the Childcare Credit." BabyCenter. Web. 31 July 2014.
http://www.babycenter.com/0_tax-time-flexible-spending-plans-versus-the-childcare-credit_3651253.bc
"Health Care Options, Using a Flexible Spending Account FSA."HealthCare.gov. Web. 31 July 2014.
https://www.healthcare.gov/can-i-use-a-flexible-spending-account-fsa
Malcolm, Hadley. "Health Savings vs. Flexible Spending Accounts." USA Today. Gannett, 07 Oct. 2013. Web. 31 July 2014.
http://www.usatoday.com/story/money/personalfinance/2013/10/07/comparing-health-savings-plans-flexible-spending-accounts/2843953
Reviewed August 1, 2014
by Michele Blacksberg RN
Edited by Jody Smith