IRS Extends 2020 HSA Contribution Deadlines in 3 More States Due to Severe Storms

The IRS has recently announced that they have extended the 2020 tax filing deadline for victims of severe storms in certain counties of Alabama, Kentucky, and Tennessee read more

What Is a Flexible Spending Account?

If you’ve ever looked into health care savings options, you’ve probably come across flexible spending accounts. But what are FSAs, and are they the right option for you? Read on to learn more and find out if you should open an FSA.

What Is an FSA?

An FSA, or flexible spending account, is a tax-advantaged savings account that can be used for medical and dental services.

How Does a Flexible Spending Account Work?

An FSA can only be set up for employees by their employers. If your employer offers an FSA, you can then opt in and make contributions. Your contributions will be deducted from your earnings, and you won’t have to pay any income or payroll taxes on them. If you have medical or dental expenses, you can then use this money tax-free. It’s important to keep in mind that FSA funds don’t roll over into the next period, so you must use them before your period is over. However, many employers allow for a 2.5 month grace period. Some employers may also allow for up to $550 in unused funds to roll over.

The annual contribution limit of an FSA is $2,750 for individuals. If you’re married, your spouse can also contribute through their employer. If you have a dependent-care FSA, your limit is $5,000 for joint and individual filings or $2,500 if you file separately.

Should I Open an FSA?

The choice to open an FSA is up to you, but there can be many advantages. When you have money in your flexible spending account, you can use it for any qualified medical expenses that you come across throughout the year. In general, cosmetic procedures won’t be covered, but most other medical expenses are. Having untaxed funds to cover expenses can definitely save you money. The other considerations to keep in mind are the fact that rollover is limited and that flexible spending accounts typically can’t be used to cover insurance premiums.

Choosing an FSA

If you’re an employer, the choice of the FSA you offer is an important one. Make sure to provide something that offers the best advantages for you and your employees.

To find HSA investment options, visit this website.