Flexible Spending Accounts offer the ability to put aside money pre-tax from your paycheck for medical expenses. However you must use the money for a qualified medical expense before the end of the “benefit period” (usually the calendar year) except if your employer gives you a grace period. If allowed, you have an extra 2 and a half months – to March 15th - to use up your 2009 FSA account before the money is forfeited. That deadline is one month away now, so think about utilizing the remainder of your account.
Qualified expenses include any medical expense that your health insurance doesn’t reimburse, including co-pays and deductibles. It also includes eye glasses, weight loss programs and over-the-counter drugs. In many cases you can also use the account to pay for your dependent’s expenses, even if they are not covered under your health plan. (For a complete description of FSAs click here.)
The IRS also allows companies to offer a rollover-type option – the ability to use leftover 2009 money in combination with up to your full 2010 contribution within two and a half months of the end of the benefit year. This is an optional benefit though, so check with your employer to see if it is offered.
It’s important not to overfund an FSA or you will forfeit the unused contributions. But if you plan wisely an FSA can offer you tax savings you would not otherwise receive.
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