If you have a health plan through a job, you can use a Flexible Spending Account (FSA) to pay for copayments, deductibles, some drugs, and some other health care costs. Using an FSA can reduce your taxes.
What is an FSA?
A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs.
You don’t pay taxes on this money. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside.
Employers may make contributions to your FSA, but aren’t required to.
A few fast facts about FSAs
See a list of generally permitted medical and dental expenses.
FSA limits, grace periods, and carry-overs
You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options:
Your employer can offer either one of these options but not both. It’s not required to offer either one.
At the end of the year or grace period, you lose any money left over in your FSA. So it’s important to plan carefully and not put more money in your FSA than you think you’ll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs