Many people take advantage of employer’s flexible spending accounts. These accounts allow you to defer income which can be drawn upon to reimburse you for medical expenses. The benefit is the funds in these accounts are not considered income for tax purposes.
In order to make the best use of these accounts, you have to decide at the beginning of the year how much you will spend for medical expenses even though it’s difficult to predict unexpected problems. You don’t want to overestimate, because any funds not used at the end of the year disappear. It’s similar to throwing money away or burning hundred dollar bills without the expenditure of a match or oxygen.
The good news this year is the government is giving you extra time to apply for medical reimbursement from a flexible spending account. In most cases, your employer will also offer the extended deadline, but you may have to check with your company.
If you have money left over, there are some things you can do to spend the remainder quickly but not thoughtlessly:
- Stock up on certain non-prescription drugs (not vitamins).
- Get a new pair of eyeglasses, contact lenses, or prescription sunglasses.
- Browse a list of all covered expenses to see if anything you missed this year is eligible.
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11:19 am (reply)
Nice post.. These accounts are great deals for the users due to the tax advantages. Looking at the covered expenses is a great suggestion – most folks aren’t aware of all the things that the account covers.
11:38 am (reply)
Thanks, Prof. There are many surprising items in the list of possibly covered expenses.
6:40 pm (reply)
Good advice and I love the link to the FSA eligible expenses. I just included it in my blog.