Healthcare FSA
A Healthcare Flexible Spending Account (FSA) provides important tax advantages that can help you pay healthcare expenses on a pre-tax basis. By anticipating your family’s health care costs, you can lower your taxable income so you get to keep more of what you earn.
The total amount you elect for the year is available to you at the beginning of the plan year, regardless of how much you have contributed via payroll deduction. The annual maximum contribution is $3,200 per calendar year.
Once the plan year ends, you will have 90 days to submit claims for expenses incurred in the prior year. After that, all remaining funds will be forfeited. Plan carefully so you do not lose money.
Dependent Care FSA
The Dependent Care Flexible Spending Account (FSA) lets employees use pre-tax dollars toward qualified dependent care such as caring for children under the age of 13 or caring for elders. Only expenses incurred to enable you to work qualify. Thus, if you are married and your spouse is not employed, you cannot use the account unless your spouse is a full-time student or disabled.
The annual maximum amount you may contribute to the Dependent Care FSA is $5,000 (or $2,500 if married and filing separately) per calendar year.
The amount reimbursed to you under the Dependent Care FSA is limited to the amount you have contributed through payroll deductions at the time reimbursement is claimed. The individual receiving care must reside with you for expenses to qualify. Qualified dependent care expenses include:
- Preschool (but not kindergarten) tuition
- Daycare, babysitting, before-or-after school care for your child under age 13
- Adult daycare for a dependent over age 13 if they are physically or mentally incapable of self-care.
The same types of dependent care expenses that qualify for the Dependent Care FSA are eligible for a federal income tax credit but you cannot use both tax advantages for the same expenses. Consult a tax advisor to confirm which would be best for you. Carefully consider what your out-of-pocket daycare expenses will be as unused funds in a Dependent Care FSA are forfeited.
