This blog post was written by SAC student, Meadow Hall.
A Flexible Spending Account (FSA) is an account that can cover certain expenses, all while lowering your taxes. The money set aside in this account is not taxed and is limited to $3,050 per year per employer. There are two types of FSAs the Dependent Care FSA and the Health Care FSA.
Health Care FSA
You can use this FSA to spend on qualified health care expenses, such as copayments, deductibles, dental costs, vision costs, etc. You cannot pay your insurance premiums with this FSA, however. You can also use this account to pay for health care expenses for any children on your insurance that will be 26 or younger on December 31st.
Dependent Care FSA
You can use this FSA to spend on qualified dependent care expenses, such as preschool and daycare costs, before and after school care, babysitting expenses, etc. The dependent must be under 13 years old, or if they are older, they must be physically incapable of caring for themselves.
Who is Eligible?
If your employer offers health insurance, you likely qualify for an FSA. You cannot have a Health Care FSA if you already have a Health Savings Account (HSA). You must work at least 30 hours weekly, and your employer must support FSAs. You can enroll during the FSA open enrollment period, after a qualifying life event, or within 30 days of being hired.
Eligibility for a Dependent Care FSA is that you must have either a child under 13 years of age, a spouse who is physically or mentally incapable of caring for themselves, or any adult dependent that is physically or mentally incapable of caring for themselves.
HSA vs. Health Care FSA
While both help you pay for medical expenses, HSAs offer higher contribution limits if you are enrolled in an HSA-eligible plan. In addition to having lower contribution limits, FSAs generally limit your ability to carry over funds. You also can’t grow FSA contributions by investing them in stocks, a benefit of HSAs.
No matter which FSA you choose to enroll in, it is important to remember the dates on which you can incur expenses and the deadline to submit claims for reimbursement. Generally, you have until March 15th of the following year to incur expenses and until March 31st to submit claims for reimbursement, but be sure to check with your plan as some deviate from these dates.