This FSA-eligible qualified medical expense overview for 2023-2024 tax years has been updated with information for these tax years. Like health savings accounts (HSAs), healthcare-related flexible spending accounts (FSAs) offer tax-free contributions and withdrawals for qualified medical expenses, providing tax breaks equivalent to your tax rate on these expenses when used correctly. Unlike HSAs however, any money not used by the deadline set by your employer will be forfeited back – in other words: use-it-or-lose-it!
If lost contributions exceed tax savings on spent funds, FSA contributions could lead to net financial losses. Let’s avoid that! This article will highlight several common and unexpected HSA and FSA-eligible qualified medical expenses to help avoid unspent FSA funds being lost.
Get Acquainted with Your FSA Plan’s Use-It-or-Lose-It Rules and Spending Deadlines
Before considering some ways of spending down your remaining FSA funds for 2018, it is essential that you are well acquainted with your employer’s FSA rules. There are general FSA guidelines provided by the IRS; however, individual employer plans can differ significantly. Here are three key facts about your FSA:
Your remaining FSA balance for the year: this should be easy to locate within your FSA account.
Your employer’s FSA Carryover Policy: While employer plans may differ, IRS’s FSA Carryover Rule permits employer plan participants to roll over up to 20% of the maximum annual FSA contribution (inflation adjusted each year) remaining at the end of a plan year into the following one (20% of $3,050 in 2023 = $610) from one plan year to another, provided their plan allows it. For example: with a 2023 maximum FSA contribution being $3,050 plan participants could carry over up to $610 from 2023-2024 (20% of $3,050 = $610/2024/2024/2024/2023-2024 (20% of $3,050 = $610/2024/2024/2024/2024/2025/2025 = $610/2024/2025/2024/2025/2025/2024/2025 =610/2024/2025), depending on your employer plan’s policies regarding carryover policies regarding carried over balances remaining after end-year plan year end 2024 = 2023/2024 maximum annual contribution =$3,050 which can carryover up to $610 from 2023-2024 (20% of $3.050 =6/1050=6050+ 610 2024/2025 =$3,0550), provided their employer allows this option.
Your employer’s FSA spending deadline: The IRS allows a two-month and 15-day grace period in which any unused funds contributed in one year can be utilized during the first two months and 15 days of the next. However, most often employers set their FSA spend deadline as December 31.
With this information in hand, you will know exactly how much FSA funds remain to spend – along with when and how you must spend them by. Keep in mind that FSA funds may be spent on you, your spouse or any declared dependents.
Be mindful that all FSA-eligible expenses listed below are also HSA eligible. There’s no set deadline to use up your HSA balance; simply spend as needed. Unfortunately, funds cannot be transferred from an FSA into an HSA account.
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