A flexible spending account (FSA) enables you to pay healthcare expenses not covered by insurance with pretax money. Your employer deducts money from your paycheck to deposit to your FSA. Eligible expenses include medical, dental and vision care costs. Where's the rub? You have to decide at the beginning of the calendar year how much money you want withheld from each paycheck. This means calculating your anticipated costs for the entire calendar year. A good plan is to peruse the IRS list of eligible expenses (in print or online) and note any expected expenses.
1. Examine out-of-pocket health care costs. Many health plans involve deductibles and co-pays, which require you to cough up cash during the plan year. If you routinely face costs for prescription and over-the-counter medications such as blood sugar, pressure or cholesterol testing or bandages and cold packs to treat sore muscles, you can use FSA money to cover them. Determine the total of your monthly costs in these areas to arrive at the total for the year. Divide that figure by 12 to get the amount of the monthly FSA deduction.
2. Plan for alternative health care costs. Acupuncture, massage and homeopathy, for example, can be paid for with FSA funds as long as a doctor has prescribed the therapy. If your doctor has recommended such therapies, get a note or prescription to document medical necessity, then calculate the number of yearly visits to alternative medical professionals and sum the costs. Divide the figure by 12 to arrive at the monthly FSA contribution.
3. Look toward dental expenditures. You, your spouse or your children may be anticipating teeth-straightening. Find out the cost from your dental care provider, then divide that number by 12 to tally your monthly FSA deduction amount. Other dental costs, such as implants, caps and crowns, are also allowable FSA expenses.
4. Take a gander at anticipated vision care costs. Like teeth-straightening, vision care costs may be planned well in advance. To begin with, regular eye exams, scheduled every year or two, can be funded by an FSA. If, for example, you or your family decides to begin wearing contact lenses, you can cover not only the lenses but the cleaning solutions as well with FSA money. Someone in your family may be anticipating replacing their prescription glasses or sunglasses, both of which are also covered. Add up these anticipated expenditures and divide by 12 to get the monthly payroll deduction amount. Finally, add together the monthly amounts for each care category to arrive at a total monthly FSA deduction.
- Review the IRS list carefully. Such therapies as massage, for example, can only be covered with FSA money if a doctor recommends them.
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