A Flexible Spending Account (FSA) is an employer-sponsored benefit plan, where you can stash pre-tax cash to use for certain medical, dental and vision expenses. For 2017, you can contribute up to $2,600; for 2018, the max is $2,650.
The benefit of using pre-tax money for medical expenses is twofold: It provides a buffer against high out-of-pocket costs and it lowers your taxable income, which could mean you owe Uncle Sam less come tax time. Score.
There are some conditions, though. You can’t use the funds for everything you deem health-related. For example, facials and yoga class are off limits; even eye drops require a doctor’s note for reimbursement. On the other hand, there’s a long list of what is approved—from co-pays to prescription lenses and high-SPF sunscreen.
Typically, any cash you don’t use by the end of the year disappears, thanks to a “use it or lose it” policy for FSAs. But check with your company. It could offer one of two options to help you avoid losing money, either letting you carry over $500 to use the next year or offering a grace period of up to two and a half months to spend the rest. If you leave your job for any reason, you won’t be able to take your money with you, so be sure to use it up before you go. You won’t be asked to return anything you’ve already spent, either.
October 27, 2017