Does your (or your spouse’s) employer offer a flexible spending account (aka FSA)? If so, that’s hidden money you should absolutely sign up for! Why?
Because it’s tax free money!
Okay, so if the phrase tax free money still doesn’t have you convinced, here is a brief list of some of the expenses that you can pay for out of the FSA money you elect to receive. In 2015, the maximum you can get is $2,550. After reading this list of eligible expense items, I’m pretty sure that you’ll find that your family might easily need the maximum amount.
Co-pays Your flexible spending account money can be used towards paying any co-pays. You’ll have to pay a co-pay for certain doctor, hospital, and emergency visits, so estimate how much you’ll need by calculating how much you spent last year. If you don’t know how much you spent last year in co-pays, you can log into your health insurance account through your provider’s website and look at your statement history. Each policy has what is referred to as a maximum out-of-pocket amount. It’s the amount of money you must spend before the insurance doesn’t require you to pay anything else. Each time you pay for stuff, your health insurance tally’s it up. Check that amount. Surprised?
Deductibles Your flexible spending account money can also be used towards paying down your health insurance deductible! In addition to co-pays, your insurance deductible usually much be reached before the insurance will help pay for certain services. Over the years, the types of services that rely on your deductible being met have changed. I remember when I used to have my $500 deductible met before I could pay just the co-pay for my children’s well and sick visits. Nowadays, new laws have made it so that I don’t have to wait until my deductible is met before I pay the co-pay for such visits – which is awesome!
Prescriptions You guessed it: Your FSA can help you pay for all those Rx medications your doctor had prescribed (or might prescribe) for everyone in your family. This is especially helpful if you must take a brand name drug instead of the generic, which can be pretty pricey.
Diapers Holy cow, you can pay for diapers with your FSA account! New babies can cost you as much as $200 a month in diapers alone so this benefit can easily eat up the full $2,550 in your account by the end of the year! How’s that for a year supply of tax free diapers!
Other There are so many other things you can spend your FSA money on: eyeglasses and Band-Aid’s to name a few! For a complete list of items, visit the IRS website here.
With so many items that can be purchased with your FSA account, I don’t see why anyone wouldn’t always elect to receive this hidden money.
Important facts about flexible spending accounts you should know:
*If you elect to a flexible spending account from your employer, they will deduct from your paycheck the amount that you’ve elected over the year. (If you’re paid every week, the total amount you elect will be divided by 52 weeks and they will deduct that amount each week, before tax.)
*If your employment ends, your employer will not try and take the remainder of what you owe. (I know this for a fact because my husband’s career calls for frequent job changes and he’s never been asked to pay back the rest. Plus, I researched this before signing up for my first FSA account.)
*You need to spend the money you elect in your FSA within the calendar year (you might have until you file your taxes to spend last years money), so do your best to guess how much you’ll need so you don’t over commit. The extra funds won’t be carried over to the following year, nor will you be refunded any amount you don’t use.
One of my favorite parts about flexible spending accounts is that your employer gives you the full amount you elect in the beginning of the year. I like to think of it as a savings account that I get to benefit from in advance (while I pay for the account a little at a time during the year). Plus, if I use the full amount and my tax bracket is 35%, then I’m essentially getting $892.50 in extra money each year by choosing to pay for medical expenses from the FSA account instead of paying for it with after tax dollars. As a mom, I can think of a million things that I my family can do with an extra $892.50!
How has having a flexible spending account helped your family? I’d love to hear from you!