Health Flexible Spending Account (FSA)
This account allows you to use pretax dollars to pay for eligible healthcare expenses for you, your spouse, and your eligible dependents.
Setting aside pretax dollars means you pay fewer taxes and increase your take home pay. You also save money on eligible expenses that you are paying for out-of-pocket. For example, if you are in the 30% tax bracket, you can save $30 on every $100 spent on eligible health care expenses.
According to the IRS this includes items and services that are meant to diagnose, cure, mitigate, treat, or prevent illness or disease. Transportation for medical care is also included.
On March 27, 2020, the government enacted the CARES Act which, effective January 1, 2020, allows participants to use their Health Care FSA for over-the-counter (OTC) medications. This could include aspirin, ibuprofen, and cough or flu medicines without a prescription from a doctor. The CARES Act also allows reimbursement for feminine hygiene products.
For more information about eligible items, go to www.inspirafinancial.com. After you log in, go to “Help & Support” and click on the link for “Explore Eligible Health Care Expenses.” You can then search alphabetically by item. Some non-medication items may be eligible for reimbursement but will require an Inspira Letter of Medical Necessity form which must be completed by your doctor and sent to Inspira to verify the charge on your card.
Currently, the annual maximum contribution limit is $3,200.
Yes, each spouse may contribute up to the $3,200 maximum limit to their own Health FSA. This applies even if both spouses participate in the same Health FSA plan sponsored by the same employer.
The plan year is based on the fiscal year, July 1 through June 30. Health services must be rendered during the FSA’s current fiscal year to be covered.
Your entire FSA amount is available on the first day of the plan year, July 1.
The IRS rule, states that all money left in your FSA is forfeited after the plan year ends. The unused portion of your Health FSA cannot be paid to you in cash or other benefits, and you cannot transfer money between FSA accounts. To reduce your risk of losing money at the end of the plan year, carefully estimate your expenses when choosing your annual election amount.
Dependent Care Flexible Spending Account (FSA)
This account allows you to use pretax dollars to pay for eligible employment-related dependent care expenses.
Setting aside pretax dollars means you pay fewer taxes and increase your take-home pay. You also save money on eligible expenses that you are paying for out of pocket. For example, if you are in the 30% tax bracket, you can save $30 on every $100 spent on eligible health care expenses.
A qualifying individual is: your dependent child under the age of 13 who lives with you for more than half the year; your spouse or other qualifying dependent who is physically or mentally incapable of self-care and lives with you for more than half the year.
Having a Dependent Care FSA depends on if you are the custodial parent or not. If you are the custodial parent, your child is a qualifying individual even if you do not claim your child as a tax dependent. You can be reimbursed under a Dependent Care FSA. If you are not the custodial parent, you cannot be reimbursed under a Dependent Care FSA, even if you claim your child as a tax dependent.
Typical eligible expenses include before and after school care, preschool or nursery school, extended day programs, babysitter, nanny services, summer day camp, and elder day care for qualifying individuals.
The maximum is $5,000 each plan year. If you are married and file separate tax returns the maximum is $2,500.
No, if you were married and file a joint tax return, your combined maximum election amount is $5,000.
The plan year is based on the fiscal year, July 1 through June 30.
Expenses for before school care, afterschool care, and nursery school are eligible if they provide basic custodial care. Tuition fees for kindergarten and grades above are not eligible.
Yes. You must list all people or organizations that provide care for your child or dependent. You do this by filing IRS form 2441 Child and Dependent Care Expenses, along with your form 1040 each year.
No, you may not claim any other tax benefit for the tax free money you get under this FSA.
You should file your claim for the actual amount of the expense, in the example given, it is $500. As long as you have enough funds in the FSA, you will get reimbursed for that amount. If not, the remaining balance will be put on hold and paid when funds are in your account.
The IRS rule states that all money left in your FSA is forfeited after the plan year ends. The unused portion of your Dependent Care FSA cannot be paid to you in cash or other benefits, and you cannot transfer money between FSA accounts. To reduce your risk of losing money at the end of the plan year, carefully estimate your expenses when choosing your annual election amount.
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