Flexible Spending Account - FSA

AAA

DEFINITION of 'Flexible Spending Account - FSA'

A type of savings account available in the United States that provides the account holder with specific tax advantages. Set up by an employer for an employee, the account allows employees to contribute a portion of their regular earnings to pay for qualified expenses, such as medical expenses or dependent care expenses.

INVESTOPEDIA EXPLAINS 'Flexible Spending Account - FSA'

One of the key benefits of a flexible spending account is that the funds contributed to the account are deducted from the employee's earnings before they are made subject to payroll taxes. As such, regular contributions to an FSA can significantly lower an employee's annual tax liabilities.

There are limits to how much can be contributed to an FSA account per year. For medical expense FSA accounts, the limit is set by the employer, while the specified limit for dependent care accounts is $5,000 per year.

RELATED TERMS
  1. Dependent Care Flexible Spending ...

    A flexible spending account (FSA) designed to provide tax-exempt ...
  2. Medicare

    A U.S. federal health program that subsidizes people who meet ...
  3. Medicaid

    A joint federal and state program that helps low-income individuals ...
  4. Long-Term Care (LTC) Insurance

    Coverage that provides nursing-home care, home-health care, personal ...
  5. Custodial Care

    Non-medical care that helps individuals with his or her activities ...
  6. Health Savings Account - HSA

    An account created for individuals who are covered under high-deductible ...
Related Articles
  1. Budgeting

    How does the grace period work on my Flexible Spending Account (FSA)?

    Learn how the grace period works on a flexible spending account so you can take full advantage of your annual pretax contributions.
  2. Insurance

    What's the difference between a grace period and a run out period?

    Find out what a health flexible spending account is and what a grace period and run-out period are and why they are so important to those who have an FSA.
  3. Retirement

    Payroll Deductions Pay Off

    Find out how you can bypass or defer taxes on thousands of dollars each year.
  4. Personal Finance

    Benefits Of A Dependent Care Flexible Spending Account

    These accounts can lower your taxable income and help you support a dependent family member.
  5. Retirement

    Job Hunting: Higher Pay Vs. Better Benefits

    Focusing on salary may be a mistake. Find out which benefits have the highest long-run payoff.
  6. Home & Auto

    Fighting The High Costs Of Healthcare

    If your employer is cutting medical benefits, a health savings account may be right for you.
  7. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  8. Retirement

    Healthcare FSAs Increase Your Personal Savings

    This benefit could give you a return this year that puts many other investments to shame.
  9. Home & Auto

    Selecting The Right Mix Of Insurance Benefits

    Choosing employee benefits involves weighing the probability you will need them against taxes and cost.
  10. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center