An FSA saves you money by reducing your income taxes because the contributions you make to a Flexible Spending Account are deducted from your pay BEFORE your federal, state, or social security taxes are calculated and are never reported to the IRS. The end result is that you decrease your taxable income and increase your spendable income. You can save hundreds or even thousands of dollars a year. The catch, though, is that you must make all purchased you plan to have reimbursed by the end of the calendar year or you lose access to those funds AND the funds do not roll over into the next year.
Any expense that is considered a deductible medical expense by the Internal Revenue Service and is not reimbursed through your insurance can be reimbursed through the Flexible Spending Account. Examples include:
- Fees paid to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and Christian Science practitioners Contact lenses and eyeglasses
- Fees for hospital services, qualified long-term care services, accident and health, and qualified long-term care insurance premiums, nursing services, laboratory fees, prescription medicines and drugs, and insulin.
- Acupuncture treatments
- Inpatient treatment at a center for alcohol or drug addiction
- Smoking-cessation programs and prescribed drugs to help nicotine withdrawal
- False teeth, hearing aids, crutches, wheelchairs, and guide dogs for the blind or deaf
- Fees in excess of reasonable and customary amounts allowed by your insurance
- Cost of vasectomies, hysterectomies and birth control
- Non-elective cosmetic surgery
- Co-payments on covered expenses
- Deductibles
- Braces
- Prescription drugs or prescription co-pays
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