Flexible Savings Accounts (FSAs) are often offered by companies to help their employees save money by setting aside income from paychecks to pay for health-related expenses without being taxed. For many Flexible Savings Account holders, the deadline for using the funds set aside is the end of the calendar year. Medical FSAs usually provide the account holder with a debit card that can be used to pay for a wide variety of health-related expenses. Co-payments and co-insurance for visits to the doctor can be paid with the tax-free account, as can prescription and over-the-counter medications.
One unfortunate drawback from the employee’s perspective is the possibility of forfeiting the money set aside if left unused at the end of the year. I don’t have a Flexible Savings Account right now, but if I had been putting aside $100 each paycheck for myself, I would want to make sure I didn’t lose any of that money. Now that we’re approaching the end of the year, many people are likely in this predicament. FSA participants must find qualifying ways to spend hundreds or thousands of their own dollars.
Almost anything that the IRS considers a valid medical expense for tax deductions will qualify for FSA spending. Here are ten qualifying purchases that might surprise you.
- Travel and transportation. The miles you drive to and from necessary medical care qualifies for reimbursement from your FSA at the rate of $0.24 per mile. Keep a driving log and submit your details for reimbursement, as the debit card won’t come in handy for this particular expense. All travel expenses are considered. If you need to fly outside the United States for medical care, that is covered as well.
- Car modifications. If you’re looking to pimp your ride, you may be able to pay for the expenses with your pre-tax dollars in your FSA. There is a catch: the modifications must be approved by a medical professional in order to treat a condition. That leads me to believe adding accessibility features might be covered but if you’re looking for a Nitrous Oxide Systems upgrade, you may be out of luck.
- Lodging. Your FSA will cover lodging expenses incurred for required medical care. If you visit a hospital out-of-town for specialized care and need to stay in the area but not necessarily at the hospital, or if you visit a specialist with her own practice, your stay in a hotel can be paid with funds from your FSA.
- Abortions. Medical abortions are qualified medical expenses. Congress will be in heated debate soon about whether abortions should be eligible for federal assistance under the new Health Reform law. Meanwhile, you can continue to pay for an abortion with money you set aside to be exempt from income taxes.
- Over-the-counter cough syrup. This is a good option for end-of-the-year spending. Cough syrup most likely won’t expire for several years, and almost everyone suffers from colds once in a while. If you use cough syrup to ease your symptoms you can stock up now.
- Swimming lessons. If a doctor advises you to learn to swim for the treatment of a medical condition, use your FSA to pay for the expenses. Aquatic therapy is used to help with arthritis and joint stress and is also used to ease some symptoms of cerebral palsy and autism.
- Condoms. If you use condoms or other contraceptives, you can pay for these items with your Flexible Spending Account. Buy in bulk now for the future.
- Sunscreen. Not all sunscreen qualifies for payment from a Flexible Spending Account. Look for sun block with an SPF rating of 30 or higher as well as other sunburn creams and ointments.
- Viagra. Viagra and similar medications are prescription drugs, so they qualify as legitimate medical expenses for your FSA dollars. Combine this with some of the other items listed here, and you’ll be set for a good time.
- Weight loss programs. If a doctor suggests a wight loss program or drugs to treat a medical condition, then these expenses can be paid for with your FSA debit card. If you’re just looking to fit back into the jeans you wore in college, you are out of luck.
The good news is that your FSA will always cover Band-Aid bandages, even if you just plan on wearing them as fashion accessories. Have you used your FSA for any interesting expenses?
Photo credit: Mauricio Pellegrinetti
FSA Eligible Expenses, WageWorks
Mention to your friend that you suddenly received an unexpected $1,000 and I would be willing to bet he could come up with several suggestions for you. Most of those suggestions will likely involve handing the money over to him. My first suggestion is to refrain from telling your friend when you have $1,000 more than you know what to do with. Once that is achieved, it is best to have some ideas in mind just in case this situation presents itself.
Money Magazine has eleven suggestions for people who find they have $1,000 sitting around without a planned destiny.
- Top off your emergency fund. If you don’t have an emergency fund, $1,000 is a great starting point. It is quite easy to open a high-yield online savings account so you can keep your emergency fund close while letting it earn as much as possible.
- Spend five hours with a financial planner. Here Money Magazine assumes you will go to a financial planner who charges $200 per hour. Unless your finances are unusually complicated, skip this suggestion.
- Buy a top-notch stock fund. Here Money Magazine suggest putting your money in actively managed mutual funds. I suggest sticking with low-cost non-managed index mutual funds. Vanguard requires $3,000 to start investing, but the low-cost Schwab Total Stock Market Index Fund (SWTSX) requires only a $100 minimum deposit.
- Upgrade your home appliances. I can see this being a legitimate option if you have problems with your appliances or need to switch to more energy-efficient models.
- Help on a large scale You can use the $1,000 for others’ good. Money Magazine suggestions buying sheep for farmers, offering small business loans through Kiva, and planting trees. Any charitable option is a good choice for an unexpected $1,000.
- Join a gym. If you know you can make your gym membership last, this could be a suggestion that saves money through your improved health. Otherwise, a gym membership could do nothing more than suck your money away.
- Beef up your IRA (if you’re 50 or older). Anyone age 50 or older with the appropriate level of income can invest an additional $1,000 above the standard maximum in a Traditional or Roth IRA.
- Pay down credit card debt. This should probably be towards the top of the list. Paying off expensive credit card debt saves you money in interest fees down the road. $1,000 can go a long way to getting out of debt.
- Update your estate documents. Money Magazine assumes you had your estate documents in order at one point. $1,000 should cover updates to your will, health-care proxy, and power of attorney.
- Start a young investor off right. Money Magazine suggests setting up a diversified portfolio for a child using a combination of Schwab’s low-minimum and low-cost index funds.
- Become a star at work. This is the most unlikely suggestion for spending your own $1,000. Money Magazine suggests taking a class, much like the improv class Smithee is taking, or any other course that might provide you with a competitive edge. Self-development is a good idea for your own money, but I wouldn’t spend $1,000 on an activity that does nothing more than increase my value to a corporation.
What would you do with an unexpected $1,000 right now?
What to do with $1,000 now, Money Magazine, October 12, 2009
Over the weekend, I received the annual benefits enrollment package from my employer. Last year, the health benefits offered by the company changed significantly to take advantage of Health Savings Accounts and to raise prices. Even after the multiple sessions with Human Resources, there were some of my coworkers who didn’t know the difference between HSAs, PPOs and HMOs.
The publisher of Fred Brock’s new book, Health Care on Less Than You Think: The New York Times Guide to Getting Affordable Coverage, sent me an excerpt from this book, and I’d like to share it. Presumably the book will help the reader make the most out of health insurance options at the lowest cost possible.
The excerpt is a concise glossary of some of the most relevant health insurance terms.
Read the full article →
I talked about The Number by Lee Eisenberg on a number of different occasions, including an in-deplth look at the book in a five-part review. Here’s a fresh look at the “memoir,” written by Paul Farrell from MarketWatch:
Eisenberg’s book is an extremely entertaining read. I loved it… But in the end, the book is… a myth… That myth says somewhere out there is “The Number,” a magical mix of stocks and bonds and annuities and insurance and cash and gold and real estate and pensions that will make you feel safer, sleep sounder, feel more secure about your future.
The columnist believes that America can survive only if its people are Numberless. There is no Number out there. Some people get the Number, and here they are (from the article):
* Wall Street’s insiders split $21.5 billion in bonuses last year, while the stock market lost an average of almost 3% of your money annually the past five years.
* The compensation of Corporate America’s top executives continues to soar, while worker pensions and health-care insurance are cut and inflation eats away incomes.
* And in Washington, your elected representative and civil servants enjoy guaranteed pensions and health insurance and cater to shifty lobbyists like Jack Abramoff.
There is a lot of merit to some of Farrell’s points. By the time the regular saver’s portfolios reach $1,000,000 at retirement 40 years from now, a million bucks won’t go too far. Nevertheless, I think Farrell takes it too far.
