Does your employer offer a flexible spending account (FSA)? If so, it’s worth getting one and making regular contributions. These unique spending accounts are a fantastic way to lower healthcare costs.
The only way to get an FSA is through your employer. It’s a common benefit organizations of all sizes offer, allowing employees to set aside money they can use throughout the year to pay for various qualified medical expenses.
But how much can you contribute every year? In this guide, we’ll review what FSAs are and touch on contribution limits.
FSA Basics
An FSA is a tax-advantaged and employer-sponsored spending account. When you open an FSA, you can set aside pre-tax dollars from your paycheck. You can then use the funds in your FSA to pay for doctor visits, prescriptions, many over-the-counter care products and more. The IRS determines what qualified medical expenses you can use your FSA for, and you can get a list from the IRS website or your FSA administrator.
FSA funds are not finite. Unlike health savings accounts (HSAs), your contributions don’t roll over to the next year. The funds expire after a year. Your employer may offer a short rollover period, but it’s best to think of FSA contributions as a “use it or lose it” scenario.
It’s also important to note that FSAs are from your employer. Therefore, leaving your company means those funds go back to your employer. You can’t take them with you like you would if you had an HSA.
2024 Contribution Limits for FSA
In 2023, you could only contribute up to $3,050 pre-tax dollars into your FSA.
However, that limit changes in 2024. The 2024 contribution limits for FSA are $3,200. That’s a $150 increase, allowing you to save even more for qualified medical costs.
When setting up your FSA, work with your administrator to determine how much up to the limit you want to contribute. You must elect to participate in the FSA annually and adjust your contributions. Your employer will then pull pre-tax money from every paycheck.
Author Resource:-
Daniel Stewart has been helping people with their money management and personal finance with over 15 years’ experience in business finance. You can find his thoughts at HSA strategy blog.
