Get Out of Town Forum

September 7, 2021, 8:55 am

You know all those expenses your health insurance doesn't cover? Now there's a better way to pay for them. It's called a flexible spending account (FSA) and you usually get it through your employer. A lot has been written about the FSA, but it's still underused. Only about one in five employees has one.

That's too bad, considering all the benefits it offers. When you sign up for an FSA, you end up with a tax deduction for your out-of-pocket expenses. You can usually set aside anywhere from $1,000 to $5,000 to pay for expenses your policy doesn't cover. The amount depends on your policy. You do not pay federal income tax or employment taxes on the money you or your employer contribute to the FSA.

Plus, unlike a health savings account (HSA), an FSA can be opened with any health plan; you don't need a high-deductible health plan. And you'd be surprised how you can use it. Legitimate expenses usually include:

  • Acupuncture
  • Immunizations
  • Prescription eyewear (including sunglasses)
  • LASIK surgery
  • Braces
  • Over-the-counter medicines
  • First aid supplies
  • Contraceptives
  • Dentures

Beginning in 2011, however, FSA's will undergo a major change. You'll need to have a written prescription in order to purchase over-the-counter medicines with your FSA. If not, you'll be penalized for it. So, if you have a flexible spending account, you may want to put a smaller amount into it in the future.

When you enroll in an FSA, you're given a separate bank account. It's up to you how much goes into it each month, as long as you don't exceed company limits. Whatever you put in is pre-tax money. It automatically goes from your paycheck to your FSA, so there's not a lot of headache for you. You may even get a checkbook or debit card to make using it easier.

No two programs are the same, though. The amount you can deposit will vary from employer to employer. So will the list of allowable expenses. But most employees are able to set aside between $1,000 and $5,000 dollars each year.

You don't need to have a major illness to benefit from an FSA. Plenty of healthy people have one. The program is pretty flexible, after all. You can usually use the money for any expense that is health-related. There are a few exceptions, though. Among other things, the IRS will not let you use your FSA to pay for:

  • Cosmetic procedures
  • Tanning products
  • Hair implants or electrolysis
  • Funerals, burials or cremation
  • Vitamins or supplements
  • Tooth whitening products
  • Insurance premiums

There is one other important detail. You must spend everything in the account before the end of the year or as specified by your plan. If you don't, the money goes back to your employer even though it was yours to start with. Remember, the FSA is not a savings account. It's a spending account. Your balance does not roll over from year to year, but you may not have to spend everything by December 31st. Most companies offer a grace period that carries over into the next year. Sometimes the grace period goes all the way into March, or even April or May. It all depends on the company. Find out your deadline ahead of time so you can plan and spend accordingly.

As long as you've spent it by the deadline, you can't lose it. Remember, you can use it on just about anything health-related. If you have dependents, you can spend it on them, too. Just make sure you use it only for approved purchases. Otherwise, you could be penalized.

If you don't already have an FSA, you'll have to wait until your next open enrollment to get one. In the meantime, go through your records and see what your out-of-pocket medical expenses were last year. You'll probably need to set aside that amount this year, too. Go ahead buy tadalista and put it in an FSA, and enjoy the tax deduction.