If you anticipate incurring a lot of medical expenses in the next year or must care for a dependent, then an FSA might be a good fit for you. Here are some of the perks:
Tax Savings: Employees contribute to their FSA through payroll deductions, which means the money is taken out before taxes. Therefore, your taxable income is lowered and can reduce the amount of taxes paid.
Medical Savings: Although health insurance can cover many expenses, it sometimes doesn’t cover auxiliary medical costs, such as over-the-counter prescriptions, travel vaccines and preventative tests — which the money in your FSA can be used for.
Increased Take-Home Pay: Because an FSA allows you to save on taxes, that can ultimately increase how much money you take home at the end of the year. WageWorks, a leading provider of consumer-directed …show more content…
However, the full pledged amount is available to you immediately.
Debit Card: Many FSAs are connected to debit cards that you can use to pay for expenses directly.
Cons of Flexible Spending Accounts
Some drawbacks do exist for using an FSA, so make sure you understand them. Knowing the disadvantages to such an account will help you better decide whether it’s right for you and your family. Here are some of the negative aspects of an FSA:
Limitations: Employees are limited to a maximum contribution of $2,550 per year. However, a working spouse can also contribute $2,550 to his own health FSA through his employer.
Expiration: You’re generally required to use the money in your FSA within the plan year. However, some employers might offer a grace period of up to two and a half months to use your FSA, or they might allow up to $500 to be rolled over to the next year.
Lose Your Job, Lose Your Benefits: FSAs are tied to your employer, so if you leave your employer, you can’t maintain this
Tax Savings: Employees contribute to their FSA through payroll deductions, which means the money is taken out before taxes. Therefore, your taxable income is lowered and can reduce the amount of taxes paid.
Medical Savings: Although health insurance can cover many expenses, it sometimes doesn’t cover auxiliary medical costs, such as over-the-counter prescriptions, travel vaccines and preventative tests — which the money in your FSA can be used for.
Increased Take-Home Pay: Because an FSA allows you to save on taxes, that can ultimately increase how much money you take home at the end of the year. WageWorks, a leading provider of consumer-directed …show more content…
However, the full pledged amount is available to you immediately.
Debit Card: Many FSAs are connected to debit cards that you can use to pay for expenses directly.
Cons of Flexible Spending Accounts
Some drawbacks do exist for using an FSA, so make sure you understand them. Knowing the disadvantages to such an account will help you better decide whether it’s right for you and your family. Here are some of the negative aspects of an FSA:
Limitations: Employees are limited to a maximum contribution of $2,550 per year. However, a working spouse can also contribute $2,550 to his own health FSA through his employer.
Expiration: You’re generally required to use the money in your FSA within the plan year. However, some employers might offer a grace period of up to two and a half months to use your FSA, or they might allow up to $500 to be rolled over to the next year.
Lose Your Job, Lose Your Benefits: FSAs are tied to your employer, so if you leave your employer, you can’t maintain this