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.
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.
I was sitting through a presentation on benefits and the speaker told us that we could sign up for the FSA as an employee benefit. She said we could save money on taxes and use the money for things like visits to the doctor and prescription drugs.
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.
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.
FSA accounts allow you to use pretax dollars to pay out-of-pocket medical expenses. You can use the money in your FSA for medical copayments and deductibles and tons of other qualified medical expenses.