Flexible Spending Accounts: What You Should Know

A Flexible Spending Account is an account you put money into that you then use to pay for certain out-of-pocket healthcare costs. You don’t pay taxes on this money, so you’ll save an amount equal to the taxes you would have paid on the money you set aside.

You can use FSA funds to pay for certain medical and dental expenses, including copayments and deductibles. FSAs are available only with job-based health plans. You can’t spend FSA funds on insurance premiums. Make sure to check with your employer or the IRS about which healthcare expenses are allowed on the FSA account.

According to current laws, you can put up to $2,550 into an FSA each year. You generally must use that money within the plan year, but other options may be available. Check with your employer. At the end of the year, you lose any money left over in your FSA. So plan carefully and don’t put more money in your FSA than you think you'll spend within a year.

Sources: U.S. Centers for Medicare and Medicaid Services; Healthcare.gov