Flexible Spending Accounts (FSAs)

Flexible Spending Accounts (FSAs) allow you to pay for eligible expenses using tax-free dollars. Important: There is a “use it or lose it” rule imposed by the IRS. If you do not spend all the money in your FSA by March 31 of the following year for expenses incurred from January 1 – December 31, unused dollars will be forfeited per IRS regulations for pretax contributions.

Healthcare FSA

Contribute up to $3,300 per year, pretax, to pay for copays, prescription expenses, lab exams and tests, contact lenses and eyeglasses.

Limited Purpose FSA

Those enrolled in the HDHP can contribute up to $3,300 per year, pretax, to pay for eligible vision and dental expenses.

Dependent Care FSA

Contribute up to $5,000 per year ($2,500 if married and filing separate tax returns), pretax, to pay for daycare expenses associated with caring for elder or child dependents that are necessary for you or your spouse to work or attend school full-time. You cannot use your Healthcare FSA to pay for Dependent Care expenses.

How Much Could You Save?

When you contribute to an FSA, the money you set aside for eligible healthcare expenses is not taxed—meaning every dollar goes further. For example, let’s say Tom sets aside $2,000 in his FSA for the year. Normally, he’d pay $560 in federal income tax, $100 in state income tax, and $153 in FICA taxes on that amount. But by using his FSA, Tom avoids all those taxes and saves $813.

Without an FSA, Tom Would Pay:

  • 28% in federal income tax: $560 savings
  • 5% in state income tax: $100 savings
  • 7.65% in Federal Insurance Contributions Act (FICA) tax: $153 savings

Note: There is a “use it or lose it” rule imposed by the IRS. If you do not spend all the money in your Healthcare, Limited Purpose or Dependent Care FSA by March 31 of the following year for expenses incurred from January 1 – December 31, unused dollars will be forfeited per IRS regulations for pretax contributions.