Flexible Spending Account (FSA)
Flexible Spending Accounts are tax-advantaged savings accounts offered by employers that allow you to use pre-tax dollars to pay for eligible healthcare or dependent care expenses.
FSA allow employees to save a pre-determined amount for healthcare related expenses. Contributions are deducted from each paycheck as pre-tax income on the amount selected during enrollment. These contributions can be withdrawn to pay for qualified medical expenses. The contributions are made with pre-tax dollars and funds used for qualifying expenses are withdrawn tax-free.
Types of Flexible Spending Accounts
Health Flexible Spending Account
- Can cover medical, dental or vision expenses that you would otherwise pay for out of pocket.
Dependent Care Flexible Spending Account
- Can cover employment related expenses for child care up to the age of 14. A dependent care FSA is compatible with a Health Savings Account.
Limited Purpose Flexible Spending Account
- Can cover vision and dental care expenses. A limited purpose FSA is compatible with a Health Savings Account.
2022 Contribution Limits
- Individuals $2,850
- Families $5,700
Dependent Care FSA
- Individuals/Families $5,000
Limited Purpose FSA
- Individual/Families $2,850
Typically, a FSA is a use it or lose it plan. This means if you do not use your contributions they will be forfeited at the end of the year. Some plans offer a carryover of $570 to the following year.
Flexible Spending Accounts are tax-advantaged savings vehicles for qualified healthcare and dependent care expenses. The above describes the general nature of these accounts. Be sure to consult a professional for a complete understanding and to determine if a FSA is appropriate for you or your family.