As a new year dawns, many people are looking for better ways to conserve their money.
Here’s what you need to know about an FSA account and if it’s right for you.
What is a Flexible Spending Account?
A Flexible Spending Account (FSA) is a benefit that allows you to have pre-tax dollars deducted from your paycheck to pay for eligible healthcare expenses.
It not only covers your medical expenses, but also the expenses of your spouse and dependents. Depending on your tax bracket, you can save up to 30% or more in taxes.
How much can you set aside each month and how it works
An FSA is very similar to a savings account that you contribute to every year.
When registration opens, you will be asked how much you would like to contribute. But, you can choose to put up to $2,850 per year. The cap in 2021 was $2,750.
Your employer can also contribute on your behalf, but is not required to do so.
You can also use your FSA for health and wellness products. Some products you can pay for from your FSA account are pain relief products, baby health essentials and healthy travel essentials.
What is the difference between a Health Spending Account and a Flexible Spending Account?
An FSA and an HSA are very similar and these types of accounts get confused quite often.
FSAs and HSAs allow people to use pre-tax income for eligible medical expenses; however, qualifications, contribution limits, rules for rolling over and changing contribution amounts, and withdrawal penalties vary.
Below is a table of the differences.
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