Are You Passing Up Free Money?
Before you check the “same as last year” box during this year’s benefits open enrollment, take a minute to make sure you’re taking full advantage of what’s available to you. One area where many people leave free money on the table is with flexible spending accounts (FSA).
Because these accounts are “use it or lose it,” people are often afraid to sign up for fear that they won’t get their money back. But with a little planning, you can take full advantage of the benefit and save quite a bit in tax dollars.
Here’s how it works: the amount of money that you elect to contribute to your flexible spending account is withheld pre-tax from your paycheck. Then when you spend money on a qualifying expense such as a doctor’s visit co-pay or approved medical expense, you apply for reimbursement from your account.
The net effect is that you are spending pre-tax dollars on your out-of-pocket medical expenses. And who doesn’t want to pay less in taxes? Depending on your tax bracket, you could save up to forty cents on every dollar you spend on medical bills. So even deferring just $200 per year could save you up to $80!
How do you decide how much to put in? Here’s how I figure it out: I know I’m going to have at least one comprehensive physical exam, one eye exam, and two dental cleanings per year. So I add up what my out-of-pocket expenses are for those visits. Additionally, I can count on ordering at least a six-month supply of contacts plus several bottles of solution, which are not covered by insurance. That gives me my baseline election amount.
I usually tack on a little extra since I’m pretty sure I’ll have at least one doctor’s visit for illness. And if you know you’re going to have an expensive procedure done, that’s a no-brainer.
If it gets to be toward the end of the year and there is still money left in your account, check out www.fsastore.com, where you can stock up on items that are approved for FSA dollars, including sunblock and bandaids! And what smart Career Girl couldn’t use more sunblock – tax free, no less!