Using an FSA is like giving yourself a pay raise.

A flexible spending account (FSA) allows you to set aside a portion of your salary, before taxes, to pay for qualified medical or dependent care expenses. Because that portion of your income is not taxed, you end up with more money in your pocket.

Health FSA/Limited Health FSA

Set aside money to pay expenses not covered by your medical insurance. There are two types of accounts:

  • Health FSA
    For use with traditional insurance plans. Use it to pay for things like coinsurance, prescriptions and medical equipment.
  • Limited Health FSA
    For use when you have both a high deductible health plan (HDHP) along with a health savings account (HSA). The Limited FSA is available for dental and vision expenses only.

Dependent Care Account (DCA)

Deduct a portion of your paycheck to use for dependent care for children up to age 13, a disabled dependent of any age or a disabled spouse. To be eligible for this type of account, both you and your spouse (if applicable) must work, seeking work or be full-time students.

How much do you save? Meet the Metzgers

Mom and dad both work outside the home. One child attends school; the other goes to a home day care. Together they make $7,500 per month and claim four exemptions on their income taxes.

  With an FSA Without an FSA
Gross Monthly Salary $7,500 $7,500
Medical Spending Account contribution $208
Dependent Care Account contribution $416 $0
Taxable income
$6,876 $7,500
$2,407 $2,625
Net pay $4,469 $4,875
Post tax medical expenses $0 $208
Post tax dependent care expenses $0 $416
Monthly Income
$4,469 $4,251


The Metzgers saved $218/month or $2,616/year!

3 Steps to a Successful FSA:

Plan – how much money you want to set aside

Spend – see what expenses are eligible for reimbursement:

Collect – the money you’ve set aside.

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