How a Flexible Spending Account works
Take a look at this year’s health expenses, especially prescriptions, to estimate health expenses for the upcoming year.
Each year, prior to enrolling into these plans, estimate your anticipated medical expenses, dependent care and transportation expenses. Contact your Pharmacist for a printout of all paid prescriptions.
The total dollar amount you decide on is evenly deducted from your paycheck throughout the plan year and deposited into your new flexible benefit account or the accounts you choose to open. This money you’ve set aside in your flexible benefit plan has not been taxed nor will it be taxed.
The funds set aside in your Flexible Spending Account are reimbursed back to you, untaxed, for any healthcare expenses not covered by your insurance plan, certain dependent care costs, and commuting expenses.
Be sure to go to our Qualified Expenses page for a more comprehensive list of what expenses are covered.
Take a look at this tax-saving example:
But there’s more good news… because you’ve set aside money every paycheck on a pre-tax basis, you’ve now lowered your gross taxable paycheck by that amount. Your employer takes out less federal, state, local, Medicare and Social Security taxes. The savings may look small at first, but over the year it adds up. Think of this as a bonus in every paycheck, compliments of the IRS.