Health Care Flexible Speding Account Explained

Health Care Flexible Spending Accounts, created by the federal government, are a great tool if used correctly. You can deposit money pretax to cover medical costs that come up during the year. The rules on what exactly you can use it for are a little fuzzy so I will do my best to explain it.

What can the money be used for?

• Co-pays and deductibles for doctor/hospital visits
• Prescriptions
• Over-the-counter medicines (Pain reliever, cold medicine, etc)
• Uncovered dental expenses
• Chiropractic services
• Uncovered eye surgery and eye glasses/contacts
• Hearing aids + batteries
• Infertility treatment
• Expenses deemed medically necessary (with official Letter of Medical Necessity)
  

Special Notes:

• Vitamins and supplements are NOT eligible
• Insurance premiums are NOT eligible
  
• If you don't use all of the money it is forfeited to the government (you lose it all!)
  
• Usually offered as part of a benefit package
• Elect to have amounts deposited to the account pre-tax form payroll
  

The Health Care Flexible Spending Account is a great tool to save some money on health care expenses via tax savings. You do not have to meet the 7.5% income threshold to deduct them. There is a yearly maximum of $5,000 and minimum if $250 to keep in mind. The best bet is to figure out your average yearly spending on health care that is eligible and use that as your target. If you have money left near the end of the year use it up if you can.

The Health Care Flexible Spending Account is a widely underused tool. I think it is in part due to it being slightly complicated and fuzzy rules. I also think that it has not caught on in the mainstream benefits package offering yet. If you have one available to you I suggest getting on board. Why pay tax when you don't have too?