Cut Your Tax Bill with a Flexible Spending Account

One of the more interesting and useful ways to take a benefit right off the top of your earned income is to use a tax-free health or flexible spending or savings account. The dollars contributed to these accounts, when used on a wide variety of medical expenses, are never taxed.

There are a bunch of different flavors of these tax-advantaged health care accounts, and depending on your employer, you might have access to one or more kinds. Let’s dive into FSAs with this guest post from T.R. Smith of Paychecks and Profits.

My First Encounter with an FSA

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I thought it was interesting, but I assumed it did not apply to me.  I did not have any prescriptions and I had not been to a doctor in years.  I figured it was a waste of money. Years later, I figured out I had missed the boat.

The FSA allows you to reduce your taxes and spend the FSA funds on many more things. I just wasn’t paying close enough attention – and the person explaining the benefit did not try to drive the point home to me and the other new employees.

A Flexible Spending Account (FSA) can be an important tool to help you meet financial goals to save more and reduce your taxes.  An FSA is generally only available as part of an employee benefits package.

What is a Flexible Spending Account?

It can be used for a wide variety of goods and services including bandages, birth control, breast pumps, some dental costs, prescriptions, eyeglasses, contact lenses, fertility treatments, guide dogs, hearing aids, medical co-payments, and much more.

The maximum amount you can put into an FSA in 2022 is $2,850. When you participate in this benefit, your employer deducts an amount from each paycheck to fund it. This means that you will reduce your taxable income by whatever you put into the FSA.

FSA Tax Benefit

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