There are two kinds of flexible spending accounts: one used for medical and health-related expenses and another for dependent care expenses. But once the year is rounding up, you may still have significant funds in your account that you need to use up before the new year or otherwise lose. That said, keep in mind that if you have both accounts, you can only spend the funds in those accounts on eligible items; there is no cross-spending between the two.
In this article, we explore flexible spending accounts in depth.
An FSA, or flexible spending account, is an employer-sponsored slush fund that lets you set aside tax-free money for medical expenses. You can sometimes get a debit card that allows you to purchase and pay for medical and health-related goods and services. Alternatively, you can pay for these items and then submit evidence of costs incurred for reimbursement.
For 2021, the maximum amount employees can contribute to their FSA is $2,750. The contributions come out of your paycheck before taxes are calculated, allowing you to save money on federal taxes. Monies typically should be spent by the conclusion of the current calendar year. But what if you have some funds remaining? Well, there are a couple of ways to deal with leftover funds.
The employer can allow you to roll over up to $550 to the following calendar year. Or they may offer you a two-and-a-half-month grace period after the end of the calendar year to use their funds. Note that your employer can choose to permit one or neither of these options, but not both.
Prior to determining how much you’ll contribute throughout the year, you should have a general idea of what expenses you will incur and also account for unexpected costs. Still, you want to make sure you get close to that estimate so that you don’t have a lot left over at the end of the year. Remember, health FSAs must be spent on health and medical expenses, and the dependent care FSA can only be spent on dependent care expenses. With that said, what can your FSA money be used for as far as expenses go? Here are a few ideas if you need to spend some of the funds remaining in your accounts:
Even if you don’t have glasses or contacts and your eyesight seems fine, getting an annual eye exam can ascertain that everything is okay with your eyes. A visual check can even uncover problems you may not have been aware of before the exam.
Maybe you’re looking to change your look or need some prescription sunglasses. Either way, those are viable options to spend your FSA on.
Sticking with the eye care theme, you can also purchase contacts and contact lens solutions with your FSA.
If you’re currently pregnant and thinking you’ll breastfeed, get a breast pump and relative supplies now ahead of time. Even if you’re older and a dependent needs a breast pump, you can buy one for them with FSA funds.
Expenses incurred on a chiropractor visit are eligible for FSA funds, but you can only be reimbursed after the services are performed. In other words, an employee is not allowed to stock up on visits. Plus, most providers require prepayment for their services, and that warrants paying upfront and getting reimbursed later.
No matter what dental procedure you need — whether it’s the exam itself, a filling, root canal, or another procedure — here’s your chance. However, cosmetic procedures, like teeth whitening, are not covered.
Nearly anything related to diabetic care, such as test strips and monitors, can qualify as an FSA expense. Other testing supplies for different conditions would also be covered.
Birth control pills are expenses that many tend to omit from the FSA spending list. But if you take birth control pills, this can be a reimbursable expense. Better still, at the end of the year, ask for a 90-day supply to use up a little more of your remaining funds.
You can spend FSA funds on menstrual care products, like pads, tampons, cups, and undergarments. Stock up for the year and then no longer worry about it for the year.
It’s the end of the year, and you aren’t thinking about the warm weather or that items to brave this period are covered. But now is an excellent time to get a year’s supply of sunscreen, eliminating yet another thing to worry about next summer.
If you require treatment far away that involves food and lodging expenses, you can seek reimbursement from your FSA.
If you, your spouse, or your dependent have a medical condition that you attend a medical conference for (to know more about), the cost of the conference is eligible. In this case, though, the lodging and meals are not.
Another FSA-qualifying expenses are costs incurred in caring for someone in your home with a medical condition that requires special house modification. This remodeling would include modified staircases, wheelchair ramps, railings, and wider doorways.
You can claim mileage reimbursement from your FSA for any medical appointment or procedure. Your dependent care–FSA can also reimburse you for mileage incurred by care providers, but not for your mileage.
Provided what you purchase is for treating a medical condition, FSA covers it. Cosmetic items and toiletries aren’t covered, but some vitamins, such as prenatal vitamins, are.
Also eligible are any modifications to make your vehicle more accessible for you or someone in your home.
Special education, like tutoring or classes in schools that offer special services, will be covered.
Only physician-prescribed and -monitored programs are reimbursable.
Personal protective equipment like hand sanitizer and facemasks, as well as at-home tests, are all covered expenses.
Pasquesi Sheppard LLC would like to remind you that throughout the year, you should document these expenses and save the receipts so that you can be reimbursed through your FSA. Without proper documentation, these expenses will not be reimbursed to you. It’s easier to stick them in a dedicated folder or envelope as the year goes on than it is to try to find them all at the end of the year. Knowing what expenses are covered should help you keep the necessary documentation for reimbursement.