FLEXIBLE SPENDING ACCOUNTS (FSA)

How Do FSAs Work?

When you set aside pretax dollars from your payroll check in one or both of the FSA accounts and draw on the account for qualifying expenses (such as medical, vision, dental, over-the-counter drugs, dependent day care charges), you never pay federal, state, or Social Security tax on the money you set aside. Because of the tax benefits of the FSAs, the IRS places strict guidelines on them. One of the most important is the "Use-It-or-Lose-It" rule. If you have unused dollars in your account at the end of the year, you cannot roll them over to the next plan year, and they cannot be paid out to you. So you must plan carefully when deciding how much you want to contribute.

Use the FSA calculator to estimate your FSA contribution and potential tax savings (link opens new window).

Furthermore, you should consult your tax advisor to determine how your participation in an FSA affects your Federal income tax return.