A flexible spending account (FSA, sometimes known as a flexible spending arrangement) allows a worker to contribute 澳洲幸运5官方开奖结果体彩网:pretax earnings to pay for qualified medical expenses. This can include co-pays, prescription medications, chiropractor visits, eyeglasses, and LASIK eye surgery.

But what happens if you don't use all the money in your account during the calendar year? Does that money roll over to the next tax year? Keep reading to find out more about the FSA, how it works, and what happens to any unused money you may have left over after the tax year ends.

What Is an FSA Rollover?

An FSA is a type of savings account offered by employers. It allows you to make 澳洲幸运5官方开奖结果体彩网:contributio𝄹ns using your pretax earnings through payroll deductions. Some employers also match a certain percentage of employees' contributions. The money can be used for things like medical expenses and child/dependent care. The 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) allows a maximum contribution of $3,050 in 2023.

The FSA was traditionally a use-it-or-lose-it account. Any money left over at the end of the year was forfeited. But in 2021, the澳洲幸运5官方开奖结果体彩网: U.S. Treasury Department amended the original use-or-lose rule for these accounts to allow some funds to roll over at the end of the plan year.

According to the revised regulations, employers have one of two options available for FSAs. They can either allow a maximum of $610 in unused funds in a health-related FSA to be rolled over from the previous year into the following plan year or they can offer employees a 澳洲幸运5官方开奖结果体彩网:grace period of up to 2.5 months for employees to use the money.

For example, let's say your employer chose to let you roll over a maximum of $610. If you elected to contribute $2,600 for a year, but only spent $2,300, you could carry over the remaining $300 to use next year. Keep in mind, if you only spent $1,000, you could still carry over $610, but you would lose the remaining $990.

If your employer has opted into a plan with a grace period, you can use your account until March 15 or another end date specified in the plan information. You can't have both options—a grace period and a rollover—available.

A sum rolled over from a previous year does not count against the next year's contribution limit. In addition, sums carried over can continue to be carried over in subsequent years.

Contribution Limits vs. How Much to Contribute

The IRS sets the FSA contribution limit, which is annually indexed to inflation. As mentioned above, that figure for the 202e tax year is $3,050. There are ways to get around that limit, however. For example, an individual employed by two different companies during the tax year could contribute $3,050 under each employer’s 💜FSA pla😼n, provided the employers are unrelated.

How much should you contribute annually to an FSA account? Start by looking at your plan information to see what counts as qualified 澳洲幸运5官方开奖结果体彩网:medical expenses. This could include:

• Prescription drug co-pays
• 澳洲幸运5官方开奖结果体彩网:Dental and orthodontic expenses
• Eye exams
• Contact lenses and eyeglasses

To determine your FSA contribution for a year, estimate these expenses based on what you spent in previous years. Be sure to take into cons꧑ideration whether anything will be different this year (dental work, new family members, etc). Try to plan your contribution so you are only putting in as much as you expect to need, with a small cushion for unexpected expenses.

FSA Grace Period

Some flexible spending account plans include a 澳洲幸运5官方开奖结果体彩网:grace period at the end of the year. This is a set amount of time during which time you can use any unspent money in your FSA. The grace period can be up to a maximum of 2.5 months after the start of the new year, which would be March 15th of the year after your contributed.

Depending on the way your plan is set up, the grace period may be shorter than 2.5 moꦆnths. Any unused FSA balance would be lost after the grace period ends.

Run-Out Period

Run-out is a predetermined period during which you can file cꦚlaims for the previous year. For instance, if your run-out period lasts until March 31, you have until that time to file clཧaims for expenses you incurred before Dec. 31.

Let's say you visited the dentist on Nov. 1, but you didn't file the claim right away. You could still file before March 31 and be reimbursed from your FSA. If you wait until after March 31, you forfeit any unused funds.

Run-out periods can vary by plan, so you need to speak with your 澳洲幸运5官方开奖结果体彩网:plan administrator or 澳洲幸运5官方开奖结果体彩网:human resources (HR) deparꦡtment to find out important dates🌸 and information about your plan.

FSA vs. Health Savings Account (HSA)

The 澳洲幸运5官方开奖结果体彩网:differences between FSAs and HSAs can be𝓡 confusing, so it's important to understand how they work. The following are some of the main difference𒐪s between the two.

FSAs are only offered through employers, so if you're unemployed or 澳洲幸运5官方开奖结果体彩网:self-employed, you can't open one. HSAs, on the other hand, are individual accounts, which means anyone can establish one. These accounts can be set up through a qualifying 澳洲幸运5官方开奖结果体彩网:financial institution.

Both accounts can be funded through your employer. But if you leave your employer, you can't take your FSA with you. Fortunately, your HSA is a 澳洲幸运5官方开奖结果体彩网:portable account, which means even if you quit your job, you can still access the money you've saved.

The maximum contributions for each account are different, too. The FSA has a maximum limit of $3,050 in 2023. The IRS set the 2023 limit for HSAs at $3,850 for individual accounts and $7,750 for family coverage.

Qualifying for these accounts is also different. There are no thresholds for FSAs, but there are for HSAs. According to the IRS, you must have a 澳洲幸运5官方开奖结果体彩网:high-deductible health plan (HDHP) to be able to establish an HSA.

For 2023, your plan's 澳洲幸运5官方开奖结果体彩网:deductible must be more than $1,500 for individual coverage or $3,000 for a family. Your 澳洲幸运5官方开奖结果体彩网:out-of-pocket expenses can't exceed $7,500 for individual coverage or $15,000 for family coverage.

Out-of-pocket expenses do not include insura🉐nce premiums, but they can include:

• Deductibles
• Co-insurance
• Co-payments
• Payment for uncovered services
• Other medical expenses

The Bottom Line

Flexible spending accounts are 澳洲幸运5官方开奖结果体彩网:tax-advantaged accounts that are only available to people through their employers. They provide an excellent way to save money for medical expenses or child/dependent care using pretax dollars. This helps you save for a rainy day and lowers your tax burden by lowering your 澳洲幸运5官方开奖结果体彩网:taxable income.

But these accounts do have restrictions, including what happens to any money left over that you haven't used by the end of the year. Be sure you do your research before you sign up for an account. Speak with your plan administrator or HR representative if you have any questions during the tax year.

Correction—Aug. 16, 2023: A previous version of this article miscalculated the amount you would lose if you elected to spend $2,600 in a year but only spent $1,000 and had the rollover option. It has been revꦫised to correct the mistake.