Here’s a quick breakdown of the three types of Flexible Spending Accounts (FSAs):
1. Healthcare FSA: Helps pay medical, dental, and vision expenses not covered by insurance.
2. Limited-Purpose FSA: Dental and vision only. Ideal if you’re also contributing to an HSA.
3. Dependent Care FSA (DC-FSA): Covers childcare, preschool, and even day camps.
Your contributions to an FSA avoid both income and payroll tax. But FSAs come with rules, especially the “use-it-or-lose-it” requirement. Some employers offer a rollover or grace period, but unused funds can be forfeited.
How can you get the most out of your FSA? Plan ahead: estimate expenses, know your employer’s options, and track your balance throughout the year. When used strategically, FSAs can turn routine healthcare and childcare spending into meaningful tax savings.
