Photo by caricaturas
For the past several years, I’ve enrolled in a Flexible Spending Account (FSA) at work. I designate a dollar amount for the year, and my company deducts a percentage of it each week from my paycheck. I’m issued a debit card to use for medical-related expenses.
Why an FSA?
I enrolled specifically for the cost of my son’s braces. I simply present the debit card for payment each month, and the orthodontist deducts his fee. I don’t pay any money out-of-pocket, and my payroll deduction covers the entire fee for the year.
Tax Savings
But that’s not the only benefit. The payroll deductions are made on a pre-tax basis. So, not only do I get to pay for my son’s braces with pre-tax dollars, but I lower my taxable income for the year for the amount that’s deducted for my FSA. It’s a great deal all around.
Different Kinds
There are more flavors available. There are childcare FSAs, and accounts that cover legal costs. You just need to be able to estimate your expenses for the coming year. This skill is important because there is one drawback: you need to spend every dollar of your contribution in the current year, because you can’t rollover any unused funds. It’s a use-it-or-lose-it proposition.
For more advice on health care finance, check out this book:
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