There are two types of Flexible Spending Accounts (FSA’s) available to you. Both help you avoid taxes and save money on qualified expenses. For most people, the savings will be 30% or more.
Dependent Care Account
- The dependent care account allows you to pay for certain child and dependent daycare expenses using before-tax dollars. You may contribute up to $5,000 in a dependent care FSA.
Healthcare Spending Account
- The healthcare spending account enables you to pay eligible out-of-pocket health care expenses with before-tax dollars. You may contribute up to $2,600 a year to a medical FSA.
As out-of-pocket costs for health care grow, FSAs become a more important money-saving tool for everyone. Most medical, dental, and vision care expenses you pay – like deductibles, co-insurance, prescription copayments, or even the cost of Lasik – can be paid using your FSA. Participants in the FSA’s receive a debit card so that many expenses can be paid without the need to pay first then file a claim. IRS regulations demand that the FSA provider prove that expenses meet the IRS rules. You will be asked to supply receipts as a backup for many charges, so keep them in a safe place and provide them promptly when they are requested.
