Think about a Flexible Spending Account as a personal savings account set up through your employer that you use just for health care expenses. You decide how much you’ll need for the coming year and set aside that amount in your FSA. The bonus? Any amount you contribute and use from your FSA actually saves you money because it reduces your taxable income.
First, decide how much money you want to set aside to cover your health care and medical expenses for the coming year. It’s important to estimate carefully and use your Health Care FSA funds by the end of the year. There is a “use it or lose it” condition which means any money left in the account can’t be used for expenses in the next year.
Next, have your employer withhold an equal portion of that amount from each paycheck, deducting it from your earnings on a pre-tax basis.
Then, use your Flexible Spending Account funds throughout the year to pay for qualified health care or medical expenses.
FSAs can be used on a variety of medical expenses not covered by your health plan including copays, prescriptions, new glasses and dental costs. So if you know you’ll have certain costs each year, why not save that money in a Flexible Spending Account?
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