Flexible Spending Accounts (FSA) are a great way to reduce your taxes but you can lose money if you don’t spend it before the end of the year. FSAs allow you to set aside money on a pre-tax basis for deductible medical expenses that are not covered by your health insurance plan. However, any funds left in your FSA account are forfeited if not spent by the end of the coverage period which is typically Dec. 31. Some plans will allow you to get reimbursed for expenses incurred after Dec. 31 but it depends on your particular plan so be sure to check with your employer.
FSAs are employer-sponsored accounts that allow employees to make pre-tax contributions. The contributions can be used by the employee to pay for out-of-pocket medical expenses (i.e., deductible medical expenses that are not covered by the employee’s health insurance plan). Employee contributions in a FSA are “use-it-or-lose-it” meaning that the employee needs to spend the money in the account before the coverage period ends otherwise the unused funds will be forfeited. The coverage period depends on your employer’s specific plan however, many plans follow the calendar year.
If your coverage period ends on Dec 31 and you have not used all of the funds in your FSA here are some medical expenses that are typically covered.
* Deductibles and co-pays for medical and dental visits and treatments.
* Medical expenses for dental treatments including fees paid to dentists for X-rays, fillings, braces, extractions, dentures, etc. Generally, teeth whitening expenses are not deductible medical expenses.
* Fees for acupuncture or chiropractic treatments.
* Medical expenses for an inpatient's treatment at a therapeutic center for alcohol addiction. This includes meals and lodging provided by the center during treatment.
* Fees for ambulance services.
* Medical expenses for breast reconstruction surgery following a mastectomy for cancer.
* Medical expenses for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent.
* Contact lenses needed for medical reasons and the cost of equipment and materials required for using contact lenses, such as saline solution and enzyme cleaner. You can also include expenses for eyeglasses and laser eye surgery or radial keratotomy.
* Medical expenses for in-patient care at a hospital or similar institution if a principal reason for being there is to receive medical care. This includes amounts paid for meals and lodging.
* Insurance premiums you pay for policies that cover medical care.
* Medical expenses for psychiatric care and psychoanalysis.
For more information about deductible medical expenses, visit the IRS’ web site and review Publication 502. http://www.irs.gov/publications/p502/ar02.html#en_US_publink100014786
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