Health Flexible Spending Account (FSA)

Dependent Care Flexible Spending Account (FSA)



Health Flexible Spending Account (FSA)

What is the Health Flexible Spending Account (FSA)?

This account allows you to use pretax dollars to pay for eligible healthcare expenses for you, your spouse, and your eligible dependents.

Why is it a good idea to have a Health FSA?

Setting aside pretax dollars means you pay fewer taxes and increase your take home pay.  You also save money on eligible expenses that you are paying for out of pocket. For example, if you are in the 30% tax bracket, you can save $30 on every $100 spent on eligible health care expenses.

What expenses are covered under a Health FSA?

According to the IRS this includes items and services that are meant to diagnose, cure, mitigate, treat, or prevent illness or disease. Transportation for medical care is also included.

Are over-the-counter medications eligible expenses?

Yes, but they require a prescription. IRS rules state that over-the-counter medications and drugs are not eligible for reimbursement under your Health FSA unless prescribed by a doctor. These rules do not apply to insulin.

Is there a limit to how much I can contribute to my Health FSA?

Currently, the annual maximum contribution limit is $2,500. This limit will increase to $2,600 in the 2017-2018 plan year.

Can my spouse also contribute to a Health FSA?

Yes, each spouse may contribute up to the $2,500 maximum limit to their own Health FSA. This applies even if both spouses participate in the same Health FSA plan sponsored by the same employer. This limit will increase to $2,600 in the 2017-2018 plan year.

What is the plan year for the state's FSA accounts?

The plan year is based on the fiscal year, July 1 through June 30. Health services must be rendered during the FSA’s current fiscal year to be covered.

How much money is available during the plan year?

Your entire FSA amount is available on the first day of the plan year, July 1.

What is the "use it or lose it" rule?

The IRS rule, states that all money left in your FSA is forfeited after the plan year ends.  The unused portion of your Health FSA cannot be paid to you in cash or other benefits, and you cannot transfer money between FSA accounts. To reduce your risk of losing money at the end of the plan year, carefully estimate your expenses when choosing your annual election amount.

Dependent Care Flexible Spending Account (FSA)

What is the Dependent Care Flexible Spending Account (FSA)?

This account allows you to use pretax dollars to pay for eligible employment-related dependent care expenses.

Why is it a good idea to have a Dependent Care FSA?

Setting aside pretax dollars means you pay fewer taxes and increase your take-home pay. You also save money on eligible expenses that you are paying for out of pocket.  For example, if you are in the 30% tax bracket, you can save $30 on every $100 spent on eligible health care expenses.

Who is a qualifying individual?

A qualifying individual is: your dependent child under the age of 13 who lives with you for more than half the year; your spouse or other qualifying dependent who is physically or mentally incapable of self-care and lives with you for more than half the year.

What if I am divorced?

Having a Dependent Care FSA depends on if you are the custodial parent or not. If you are the custodial parent, your child is a qualifying individual even if you do not claim your child as a tax dependent. You can be reimbursed under a Dependent Care FSA.  If you are not the custodial parent, you cannot be reimbursed under a Dependent Care FSA, even if you claim your child as a tax dependent.

What expenses are covered under a Dependent Care FSA?

Typical eligible expenses include before and after school care, preschool or nursery school, extended day programs, babysitter, nanny services, summer day camp, and elder day care for qualifying individuals.

How much can I put in my Dependent Care FSA?

The maximum is $5,000 each plan year. If you are married and file separate tax returns the maximum is $2,500.

My spouse also has a Dependent Care FSA. Can we both contribute up to $5000?

No, if you were married and file a joint tax return, your combined maximum election amount is $5,000.

What is the plan year for the state's FSA accounts?

The plan year is based on the fiscal year, July 1 through June 30.

Is school tuition an eligible dependent care expense?

Expenses for before school care, afterschool care, and nursery school are eligible if they provide basic custodial care. Tuition fees for kindergarten and grades above are not eligible.

If I have a Dependent Care FSA, do I need to report anything on my tax return at the end of the year?

Yes. You must list all people or organizations that provide care for your child or dependent. You do this by filing IRS form 2441 Child and Dependent Care Expenses, along with your form 1040 each year.

If I have a Dependent Care FSA, can I claim the Household Independent Care Credit on my tax return?

No, you may not claim any other tax benefit for the tax free money you get under this FSA.

I put $400 each month into my Dependent Care FSA, but our actual expenses are closer to $500 a month. Should I submit my claim form for $400 or for $500?

You should file your claim for the actual amount of the expense, in the example given, it is $500. As long as you have enough funds in the FSA, you will get reimbursed for that amount. If not, the remaining balance will be put on hold and paid when funds are in your account.

What is the "use it or lose it" rule?

The IRS rule states that all money left in your FSA is forfeited after the plan year ends.  The unused portion of your Dependent Care FSA cannot be paid to you in cash or other benefits, and you cannot transfer money between FSA accounts. To reduce your risk of losing money at the end of the plan year, carefully estimate your expenses when choosing your annual election amount.

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