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The Financial Planning Association, Denver, Colo., explains
how Flexible Spending works: If your employer offers a flexible
spending account (FSA) for health care, you can direct your
employer to set aside a certain amount of money from each
paycheck to be credited to your account. As you accumulate
un-reimbursed medical expenses, the account pays you back,
up to the total set aside.
The money the employer deducts from each paycheck is from
pre-tax dollars. For example, if you have $3,000 set aside
in an FSA and you are in the 28% Federal income tax bracket,
you will save $840 on your tax bill. The higher your tax bracket,
the greater your tax savings. With some exceptions, you also
can save state and local taxes.
Another bonus is that the entire amount you want set aside
for the year is available to cover expenses at the start of
the benefit year, even though the money is deducted from your
paycheck throughout the year. You can estimate your medical
expenses by averaging usual costs from the past few years,
factoring in known upcoming expenses, such as a Green Mountain
stay.
In addition to Green Mountain at Fox Run program costs,
you can also be reimbursed for co-pays, deductibles, dental
care, eyeglasses, prescription drugs, acupuncture, psychiatric
care, and more.
The health care reimbursement is permitted if it meets a
genuine medical need. (Having your doctor's Rx for a
weight loss program will likely suffice.) For more information,
consult with your tax advisor or visit www.irs.gov
for the Internal Revenue Service publication 502 "Medical
and Dental Expenses."
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