Use It Or Lose It

The countdown has begun for spending your FSA Pre-Tax dollars

In 2020, employees could designate a maximum of $2,750 to an FSA account or HCFSA, which covers a family. If there are two wage earners in the family, each could contribute $2,750 to an individual FSA but claim $5,000 as a family.

The primary benefit of using pre-tax dollars is lowering your tax burden with the IRS and paying for things that are not part of your medical coverage. This enables you to save several hundred dollars on federal taxes, depending on your tax bracket. And the list of things you can buy and the eligible services under an FSA is wide-ranging. Everything from aspirin and over-the-counter cold remedies to sunscreen, wheelchairs, and in special cases, daycare and airfare are included.

FSA plans were introduced in the 1970s and adjusted to include over-the-counter drugs in 2003. But it can be tricky. Vitamins are not deductible unless used to treat a specific health issue, such as iron deficiency or prenatal vitamins.

Perhaps that is why even though more than 80% of large employers (500 employees) offer an FSA, and 33 million Americans enroll in one, a significant majority don’t completely understand what is and is not an eligible deduction.

The plan is based on a calendar year with a use-it-or-lose-it provision. You must use the money contributed to an FSA by December 31st. Any balance cannot be carried over, although the IRS has granted employers the option to add a two-and-a-half-month carry- over period, essentially right up to March 15th when income tax returns are due. But thatis at the discretion of the employer.


What are the drawbacks of an FSA? If you contribute to an IRA or 401k retirement plan that also involves contributing pre-tax dollars, you can be leaving yourself short on take-home pay with an FSA. If you leave for another job, you lose whatever balance is in your FSA, and you cannot change your plan unless there is a qualifying event during the year, such as a change in employment status, marital status, or the birth of a child.

In the past, employees would have to submit receipts for FSA expenses and be reimbursed by their employer. Now, an FSA debit card is issued and can be used like a bank debit or credit card. But keep your receipts, anyway, for verification if Uncle Sam comes calling. So, if you have an FSA, now is a good time to use whatever balance remains and to double- check on what is deductible.


FSA Coverage People may be surprised to learn about the items and services that can be paid for with an individual FSA account and family account (HCFSA.) Here are a few. For a comprehensive list, visit FsaStore.com

  • Co-pays (medical, dental, and vision)

  • Aspirin

  • Cold remedies

  • Cough drops

  • Antihistamines

  • Substance abuse treatment

  • Acupuncture (with a letter of medical necessity)

  • Infrared forehead thermometer and pulse oximeter (helpful during a pandemic)

  • Adhesive bandages

  • Reading glasses or contact lenses

  • Sunscreen (SPF 15 and higher)

  • Canes, walkers, and crutches

  • Exercise equipment (with a letter of medical necessity)

  • Batteries (if needed to power medical device)

  • Airfare (if needed to see an out-of-town doctor)

  • Daycare, extended care, or after school care (if a parent(s) require it to be able to work)

Featured Posts
Recent Posts
Archive
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square
Advertise with Living Magazine!

Subscribe To Our Newsletter

You’ll gain access to local promotions, special content not found in the pages of Living Magazine, giveaways, and other fun tidbits.