Healthcare And Dependent Care Flexible Spending Account: Fill & Download for Free

A Flexible Spending Account is a perk that an employer can provide. It allows you to have pre-tax money deducted from your paycheck. There are two kinds of FSAs: healthcare and dependent care. I'll focus on the healthcare kind here.FSAs are "nominal accounts". That is, the money isn't really yours until you receive a payment from the FSA. The accounts are known as "use it or lose it" accounts -- if you haven't used up the money by the end of the year, you just forfeit it. The same goes if you lose your job -- any money you haven't used when you get your termination notice is just gone. Another quirk is that you can use the full amount of your annual FSA contribution at any time, even if it hasn't all been withheld from your paychecks yet.To have a Health Savings Account, you must have a high-deductible health insurance plan. These plans can be either group plans or private insurance -- you don't need to be employed to have an HSA. Your contributions to an HSA are pre-tax if you have them deducted from a paycheck, or tax deductible if you make the contributions yourself. An employer may also contribute money to employees' HSAs.An HSA is a real account in your name with a custodian, such as a bank or brokerage. Similar to an IRA, many custodians will actually let you invest the HSA balance in a variety of investments. HSA balances roll over from year to year, and you keep them if you move from company to company. If you die, your beneficiaries will inherit your HSA.For both FSAs and HSAs, withdrawals are tax-free if used for qualifying health, vision, and dental purposes. Qualifying expenses are for the most part the same, with one important distinction: if you have a high-deductible plan, you can not use an FSA to pay for health expenses until you have satisfied your insurance deductible. (Vision and dental expenses are okay, assuming the issues wouldn't be covered under health insurance.) People with traditional low-deductible plans don't have this FSA restriction.One interesting thing about HSAs is that once you reach age 65, you can withdraw money from them for non-healthcare expenses without any penalty. You would still pay income tax, just as if you withdrew money from a traditional IRA, but there's no additional penalty as there is when you're younger. This means that maxing out an HSA is usually a good idea for anyone who is eligible and can afford it. If you have substantial health expenses, you'll have money to pay for them tax-free. If you stay healthy, you can use the HSA just like an IRA when you reach retirement age. (In a way, HSAs are actually better than IRAs because they don't have minimum required distributions at any age.)In contrast, it only makes sense to contribute the maximum to an FSA if you are reasonable confident you will use most of the funds. Especially for someone in a high-deductible plan who doesn't expect to meet the deductible, who therefore will only use the FSA for vision and dental expenses, the maximum contribution will usually mean forfeiting money.

If both spouses' employers offer a flexible spending account, you can each contribute to your own FSA. However, you do not get to double the benefit amount. The maximum amount a married couple can claim is $5,000, the maximum household limit.You are married and filing separately, the maximum each of you can claim is $2,500; or if either of your earned income is less than these amounts, then that amount is your maximum. It is also important to know that you cannot both claim reimbursement for the same dependent care costs.

It depends on the terms of your specific plan, known as the “plan design”:In 2005, the Internal Revenue Service authorized an optional grace period of up to 2½ months that employers can use in their plans, allowing use of the funds for up to 2½ months after the end of the plan year.Under the terms of the Affordable Care Act, a plan may permit an employee to carry over up to $500 into the following year without losing the funds.Flexible spending account - Wikipedia