A flexible spending account (FSA) is an employer-sponsored benefit that allows employees to contribute pre-tax earnings toward qualified medical and dental expenses. The contributions reduce taxable income, which can lead to tax savings. FSAs can also be used for dependent care expenses if the employer offers a 澳洲幸运5官方开奖结果体彩网:Dependent Care FSA.

FSA Contributions

FSA contributions have an annual limit and are adjusted for changes in the 澳洲幸运5官方开奖结果体彩网:cost of living by the IRS every year.

Contributions are exempt from federal income tax, federal unemployment tax, 澳洲幸运5官方开奖结果体彩网:Social Security, and Medicare taxes. To qualify for tax-free status, distributions from an FSA must not exceed contributions in a particular calendar year, and the funds must be 𒆙澳洲幸运5官方开奖结果体彩网:spent on qualified medical expenses.

Medical Coverage

FSAs typically operate on a “use-it-or-lose-it” basis. This means that funds not used by the end of the plan year are forfeited, though some plans may offer a grace period or allow a small rollover:

Some employers offer a grace period of up to 2½ months after the year ends, giving employees extra time to use their remaining FSA balance. Alternatively, employers may allow a carryover of up to $660 for 2025 to the following year.

Most cosmetic procedures, such as teeth whitening, a facelift, or liposuction, are not covered. However, some illnesses or accidents lead to physical injuries that can be treated with surgeries and procedures typically considered cosmetic. FSA funds can be used to pay for these specific cosmetic surgeries as they are performed to treat a medical condition.

Who Can Use FSA Funds?

FSAs can cover a broad range of qualified medical, dental, and dependent care expenses as long as they are necessary and not reimbursed by 澳洲幸运5官方开奖结果体彩网:insurance. These include:

• Medical & Dental Expenses: Doctor’s visits, dental work (e.g., artificial teeth), prescription medications, bandages, smoking cessation programs, and therapy.
• Dependent Care: For a Dependent Care FSA, funds can cover daycare, nursery school, or elder care for qualifying dependents.

However, a dependent with a 澳洲幸运5官方开奖结果体彩网:gross income above $4,400, files a joint return, or can be claimed as a dependent on someone else's return is not eligible.

Benefits and Restrictions

Expenses are considered qualified and unqualified under flexible spending accounts. The IRS or the employer plan administrator can verify what is a valid expense.

The Bottom Line

A Flexible Spending Account (FSA) can provide significant tax savings for employees, offering a tax-free way to pay for medical, dental, and dependent care expenses. By contributing to an FSA, employees can reduce their 澳洲幸运5官方开奖结果体彩网:taxable income while saving for out-of-pocket costs not covered by insurance. However, be mindful of contribution limits and the "use-it꧒-orꦺ-lose-it" rule to make the most of this benefit.