How to Choose the Right Amount for Your FSA

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What is a flexible spending account?
- You can spend FSA money only on “qualified medical expenses,” as determined by the IRS.
- The money in an FSA comes out of your paycheck before taxes, in regular increments. FSAs are generally pre-funded, meaning the full contribution is available to spend at the beginning of the year. If you leave your company mid-year, you will likely have to pay back spent funds that haven't been covered by your paycheck deductions yet.
- The rule for the money is “use or lose,” meaning you lose any amount you haven't spent at the end of the year. That's unlike a health savings account, or HSA, where the money you add is yours forever.
Spend your FSA money by the deadline
- Many employers let you carry over as much as $500 in unused funds for up to a year.
- Other employers might offer a grace period, in which you can spend the unused money in the first 2½ months of the next plan year.
Determining your FSA amount
- If your out-of-pocket medical bills typically amount to $221 a month or more — or roughly $2,650 a year — consider contributing the maximum to your FSA.
- If your medical expenses are generally low, contributing the total of your approximate copays, dental and vision expenses for next year is probably enough.
What to do with extra cash in your FSA
- If your FSA has the carryover option, subtract the leftover amount from next year’s contribution.
- If your FSA has a grace period into 2018, schedule any medical visits you can during that time and use your surplus to start paying down your 2018 health insurance deductible.
- Make sure you’re using FSA money for everything you can. Dental and vision costs are eligible, including expensive treatments such as braces and Lasik vision surgery.
- Spend the leftover money on things that you can use throughout 2018. All items at FSAstore.com are eligible. Product examples include thermometers, blood pressure monitors and sunscreen with a sun protection factor, or SPF, of 30 or higher. You can’t use FSA money for over-the-counter drugs such as Tylenol unless you have a prescription for it from your doctor.