How to Spend Your FSA Money Before the End of the Year
Introduction
Flexible spending accounts (FSAs) allow workers to spend pre-tax dollars on out-of-pocket medical expenses. According to a survey by the Kaiser Family Foundation, 76% of companies with 200 or more employees offer FSAs. These accounts offer many advantages, but the downside is that money in an FSA doesn't carry over from year to year. Here's how to take advantage of these accounts before the year ends.
How FSAs Work
During your open enrollment period, typically in November, you indicate the amount you wish to contribute to your FSA. The maximum amount for 2019 is $2,700. You cannot change the amount after the enrollment period unless your employment or family status changes. The money you contribute to your FSA is tax-free and is taken out of your paycheck throughout the year. You have to spend the money in your FSA before the end of the year or you lose it. Luckily, FSA money can be used for a range of medical expenses.
Image Description: Infographic explaining how FSAs work, including contribution limits and usage.
What Can You Buy with FSA Money?
The most common way to spend FSA money is on out-of-pocket medical expenses like co-pays and prescriptions. You can also use FSA money on health care products and services from bandages to acupuncture. If you haven’t gotten your vision checked or had a teeth cleaning this year, FSA money can go toward that. FSA funds can't be used for drugs without a prescription. To use an FSA for over-the-counter medication like Advil, you need to contact your doctor for a prescription. You can spend FSA money on items like ice packs, thermometers, and blood pressure monitors without a prescription.
Image Description: Infographic showing eligible expenses for FSA funds, such as medical supplies and health services.
Examples of FSA-Eligible Expenses
- Birth control
- Chiropractor visits
- Crutches
- Fertility testing kits
- Hearing aids
- Therapy
- Weight-loss programs
Image Description: Infographic listing examples of FSA-eligible expenses like birth control, chiropractor visits, and therapy.
What’s Not Included?
You can’t spend your FSA money on everything. Your FSA debit card won’t work, or you won’t get reimbursed for purchases that aren't eligible. You can’t pay for most insurance premiums using FSA money, including life insurance, disability insurance, and health insurance premiums. Here are some things you’ll have to pay for out-of-pocket:
- Cosmetic surgery
- Dancing lessons
- Teeth whitening
- Gym memberships
Image Description: Infographic showing non-eligible expenses for FSA funds, such as cosmetic surgery and gym memberships.
What If You Miss the Dec. 31 Deadline?
If you still have money left, contact your human resources department. Many employers allow you to roll over up to $500 from your FSA into the next year or offer a "grace period" until March 15 to spend the money. If you have a high-deductible health plan, consider getting a health savings account (HSA). It’s similar to an FSA but rolls over year-to-year and can generate interest.
Image Description: Infographic explaining options if you miss the FSA spending deadline, such as rollovers and grace periods.
Conclusion
FSAs are a great way to save on out-of-pocket medical expenses using pre-tax dollars. By understanding how to use your FSA funds and knowing what expenses are eligible, you can maximize your savings and avoid losing your hard-earned money at the end of the year.
