Using a Flexible Spending Account (FSA)
If you have a health plan through a job, you can use a Flexible Spending Account (FSA) to pay for health care costs, like
The amount you pay for covered health care services before your insurance plan starts to pay. With a $2,000 deductible, for example, you pay the first $2,000 of covered services yourself.
Refer to glossary for more details.
,
A fixed amount ($20, for example) you pay for a covered health care service after you've paid your deductible.
Refer to glossary for more details.
,
The percentage of costs of a covered health care service you pay (20%, for example) after you've paid your deductible.
Refer to glossary for more details.
, and some drugs. They can lower your taxes.
How Flexible Spending Accounts work
A Flexible Spending Account (FSA, also called a “flexible spending arrangement”) is a special account you put money into that you use to pay for certain out-of-pocket health care costs.
You don’t pay taxes on this money. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside.
Employers may make contributions to your FSA, but they aren’t required to.
With an FSA, you submit a claim to the FSA (through your employer) with proof of the medical expense and a statement that it hasn't been covered by your plan. Then, you’ll get reimbursed for your costs. Ask your employer about how to use your specific FSA.
To learn more about FSAs:
Facts about Flexible Spending Accounts (FSA)
- They are limited to $3,200 per year per employer. If you’re married, your spouse can put up to $3,200 in an FSA with their employer too.
- You can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse if you’re married, and your dependents.
- You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.
- You can spend FSA funds on prescription medications, as well as over-the-counter medicines with a doctor's prescription. Reimbursem*nts for insulin are allowed without a prescription.
- FSAs may also be used to cover costs of medical equipment like crutches, supplies like bandages, and diagnostic devices like blood sugar test kits.
- Get a list of generally permitted medical and dental expenses from the IRS.
- You can’t use a Flexible Spending Account with a Marketplace plan.
- Instead, a similar product, called a
A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums.
Refer to glossary for more details.
FSA limits, grace periods, and carry-overs
You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options:
- It can provide a "grace period" of up to 2 ½ extra months to use the money in your FSA.
- It can allow you to carry over up to $640per year to use in the following year.
Your employer doesn’t have to offer these options. If it does, it can be either one of these options, but not both.
Warning:
Plan ahead
At the end of the year or grace period, you lose any money left over in your FSA. Don’t put more money in your FSA than you think you'll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs.
FAQs
You can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse if you're married, and your dependents. You can spend FSA funds to pay deductibles and copayments, but not for insurance premiums.
How does a health care FSA work? ›
An arrangement through your employer that lets you pay for many out-of-pocket medical expenses with tax-free dollars. Allowed expenses include insurance copayments and deductibles, qualified prescription drugs, insulin, and medical devices. You decide how much to put in an FSA, up to a limit set by your employer.
Is an FSA a good idea? ›
For example, an FSA may be a good idea if you anticipate regular medical expenses or want to lower your taxable income. However, if you rarely need medication or visit the doctor, qualify for and prefer an HSA, or worry about the use-it-or-lose-it rule, an FSA may not be the best option.
What is the biggest disadvantage of the FSAs? ›
What are the disadvantages of a Flexible Spending Account (FSA)? The major disadvantage is the “use it or lose it” requirement.
What kind of food can I buy with my Flex card? ›
Groceries — a monthly spending allowance for the purchase of healthy grocery items such as fresh meats and vegetables, frozen meats, dairy items, canned goods, and more at participating stores near you.
Can I use my FSA card on Amazon? ›
Yes. All eligible items can be purchased with an FSA or an HSA card.
Is FSA money my money? ›
With a Health Care FSA, you use pre-tax dollars to pay for qualified out-of-pocket Health Care expenses. The money you contribute to a Health Care FSA is not subject to payroll taxes, so you end up paying less in taxes and taking home more of your paycheck.
What happens to health care FSA if not used? ›
Unused FSA money returns to your employer. The funds can be used towards offsetting administrative costs incurred during the plan year, employers can also reduce salary reductions in the next FSA year, or funds must be equally distributed to employees who enroll in an FSA for the next year.
How do I use my healthcare FSA card? ›
Your Healthcare Flexible Spending Account (FSA) debit card* makes it quick and easy to pay for eligible healthcare expenses.
- When you swipe your card at checkout, choose "credit" (even though it isn't a credit card).
- Your entire FSA annual election amount is available on the first day of your plan year.
An employee elects how much money they want to allocate, and then the money is deducted from that employee's paycheck over the duration of the year. Because it's pre-tax income, there can be significant savings when using FSA funds over money from your checking account.
Employers are not allowed to ask for money back that you spent from your FSA if you quit or retire. This is due to the Uniform Coverage rule which ensures that your Flexible Spending Account funds are available to you in full as soon as your plan year starts. Any FSA amount you don't use is returned to your employer.
How much does FSA actually save you? ›
With a Flexible Spending Account (FSA), you can save an average of 30 percent by using pre-tax dollars to pay for eligible FSA expenses for you, your spouse, and qualifying children or relatives. Here's how an FSA works. Money for your FSA is deducted automatically from your paycheck before taxes are taken out.
Will a FSA lower my taxes? ›
A Flexible Spending Account (FSA) allows you to put aside a set amount of money from your paychecks before taxes to pay for certain specific health care or dependent care expenses, which lowers your taxable income. What is the main advantage of an FSA? The main advantage of an FSA is the tax savings it offers.
What can FSA not be used for? ›
Please Note: The IRS does not allow Over-the-Counter (OTC) medicines or drugs to be purchased with Health Care FSA funds unless accompanied by a prescription and the prescription is filled by a pharmacist. If you have an OTC prescription, you can use your benefits card for these purchases.
Can I borrow from my FSA? ›
Many FSA loans are available as either Guaranteed Loans or Direct Loans. Direct Loans are made directly from FSA to the farmer. Guaranteed Loans are made by a USDA-approved traditional lender with the backing of FSA. Read more about Guaranteed Loans and access the lender toolkit here.
Can FSA pay for gym membership? ›
Weight loss programs, gym membership, and fitness programs are 'potentially eligible expenses. ' This means the costs of programs and memberships may be reimbursable expenses through your Health Care Flexible Spending Account.
What is the IRS list of FSA eligible items? ›
Remember to check with your plan administrator to confirm the expense is eligible with your specific FSA.
- Health insurance copayments, office visits, co-insurance payments, and deductibles.
- Dental work.
- Vision expenses, eyeglasses, and prescription contact lenses.
- Prescriptions.
And it's common to put medical expenses on credit cards, either to spread out the cost or to get a little something back in the form of rewards. But can you pay off that medical credit card debt using a tax-advantaged medical savings account like an HSA or FSA? In short, yes, but it's important to keep good records.
Is an Apple Watch FSA eligible? ›
(Because healthy employees mean fewer sick days and lower costs.) Well, even though there have been some rumblings about changes, wearable devices that are primarily fitness trackers are still not considered FSA-eligible.
