Health Care and Dependent Daycare Flexible Spending Accounts (FSAs) help you cover eligible expenses with tax-free dollars. The money goes into your accounts on a before-tax basis through convenient payroll deductions, then you use the money for eligible expenses that you’d be paying anyway.
If you haven’t taken advantage of these accounts, it’s worth your time to spend a few minutes learning about them—and the IRS rules governing them—so you can decide if you want to enroll in one or both accounts.
Flexible spending accounts (FSAs)
When you enroll in an FSA during Annual Enrollment, you choose an amount to be deducted from each paycheck during the year. The deductions are taken before income taxes are calculated, lowering your taxable income, which means you pay less in income taxes than you would otherwise. You can enroll in two FSAs:
- The Health Care FSA is for eligible health care (medical, dental and vision) expenses you pay out of pocket, like copays, deductibles and coinsurance. You can contribute up to $2,500 to the Health Care FSA.
- The Dependent Daycare FSA is for eligible expenses you pay for daycare to allow you and your spouse (if applicable) to work, find work or attend school full time. You can contribute up to $5,000 to the Dependent Daycare FSA ($2,500 if married and filing separate tax returns).
There are deadlines for spending the money in your FSAs each year. Plan your contributions carefully. If you don’t spend and claim reimbursement by the deadlines, you’ll lose the money left in your accounts.
Learn more about how the FSAs work.