Even the most comprehensive benefit plans do not cover every health care or dependent care expense. Expenses like day care, physical exams, medical and dental insurance deductibles and co-payments are just some of the bills you may have to pay out of your own pocket.
These costs can really add up ... particularly if, like most people, you pay for these services with after-tax dollars.
There is a way to pay for expenses not covered by your benefits plan before Federal and New York State income and Social Security taxes are deducted from your paycheck, the NazFlex Flexible Spending Account (FSA).
Think of the NazFlex FSA as a budgeting tool. Like most people you probably already set aside a portion of your pay for living expenses like food, clothing and utilities. Now using the NazFlex FSA you can set aside pre-tax dollars for unreimbursed health and dependent care expenses that you will incur in the coming year as well. During the enrollment period, you decide how much you want to put in your FSA each pay period. Then, when you incur an eligible expense, you simply swipe your FSA debit card or submit a paper claim for reimbursement and proof that the expense was incurred. You will be reimbursed from your FSA with your own money, tax-free.
Use it or Loose It
Take note: due to federal regulations, any unused funds remaining in your account at the end of the plan year will be forfeited. Plan wisely using the FSA worksheet.
What Are My Flexible Spending Account (FSA) Choices?
The NazFlex FSA consists of two accounts:
- The Health Care Account
- The Dependent Care Account
You may choose to put money aside in one or both accounts.
FSA Account Details
Health Care Account
This account lets you set money aside each year tax-free, and get reimbursed when you have out-of-pocket health expenses for yourself, your spouse and your dependent children, or your eligible domestic partner and eligible dependent children of your domestic partner (to the extent allowed by law). You can budget ahead and save taxes on predictable expenses like routine physicals, immunizations and medical and/or dental insurance deductibles and co-payments. Only expenses that are not paid by your health insurance plans (not covered or only partially reimbursed) may be reimbursed by your Health Care Account.
You can set aside up to $2,500 per year in your Health Care Account.
Dependent Care Account
This account can reduce the cost of day care, babysitting, nursery school and day camp expenses you incur so that you, your spouse or eligible domestic partner can work. The Dependent Care Account allows you to set aside as much as $5,000 each year if you are single or you are married and file a joint tax return.
If you are married and file a separate tax return, you may set aside as much as $2,500 each year.
The Dependent Care Account allows reimbursement for the same expenses that are allowed under the Federal tax credit for child and dependent care:
- Day care for children under age 13 by a qualified day care center, nursery school, babysitter or day camp
- Day care for disabled dependents of any age who are physically or mentally unable to care for themselves and whom you claim as dependents for tax purposes
The amount you contribute to the Dependent Care Account reduces the amount you can claim as a tax credit, dollar for dollar. Consequently, you need to carefully decide which gives you the better tax break; the Federal tax credit or the Dependent Care Account. In most cases, the Dependent Care Account offers the better tax savings. You may wish to discuss the Dependent Care Account option as it pertains to your own tax situation with your professional tax advisor.