Flexible Spending Account - FSA

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.

BREAKING DOWN '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.

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RELATED FAQS
  1. Are Flexible Spending Account (FSA) contributions tax deductible?

    The contributions you make to your Flexible Spending Account (FSA) are not tax-deductible because the accounts are funded ... Read Full Answer >>
  2. Are Flexible Spending Account (FSA) expenses tax deductible?

    Flexible Spending Account (FSA) expenses are not tax deductible. The U.S. Internal Revenue Service (IRS) states you cannot ... Read Full Answer >>
  3. Can a Flexible Spending Account (FSA) be used for Lasik?

    The owner of a Flexible Spending Account (FSA) can use money from the account on various eye surgery procedures, including ... Read Full Answer >>
  4. Does a Flexible Spending Account (FSA) cover braces?

    Funds from a Flexible Spending Account (FSA) can be used to cover costs associated with installing, maintaining and removing ... Read Full Answer >>
  5. Can a Flexible Spending Account (FSA) be used for a gym membership?

    The U.S. Internal Revenue Service (IRS) typically does not allow funds from a Flexible Spending Account (FSA) to be used ... Read Full Answer >>
  6. Do Flexible Spending Accounts (FSAs) expire?

    Flexible Spending Accounts (FSAs) do expire and are considered to be a "use it or lose it" type of plan. They are savings ... Read Full Answer >>
  7. Do flexible spending accounts (FSA) funds roll over?

    An individual can utilize an employer’s cafeteria plan of employee benefits to establish a flexible spending account (FSA). ... Read Full Answer >>
  8. Can a Flexible Spending Account (FSA) be used for dental procedures?

    The U.S. Internal Revenue Service (IRS) allows funds from a Flexible Spending Account (FSA) to be used for qualified medical ... Read Full Answer >>
  9. Does a Flexible Spending Account (FSA) cover glasses?

    The funds in a Flexible Spending Account (FSA) can be used to cover most common medical expenses; this includes the cost ... Read Full Answer >>
  10. Does a Flexible Spending Account (FSA) cover teeth whitening?

    Funds from a Flexible Spending Account (FSA) cannot be used for teeth whitening expenses. The U.S. Internal Revenue Service ... Read Full Answer >>
  11. Does money in a Flexible Spending Account (FSA) roll over?

    As of 2015, according to IRS regulations, the maximum amount of funds in a Flexible Spending Account (FSA) that can be carried ... Read Full Answer >>
  12. Does a flexible spending account (FSA) cover chiropractic?

    Typically, health care flexible spending accounts (FSAs) cover chiropractic treatments, as these treatments are often considered ... Read Full Answer >>
  13. What's the difference between a grace period and a run out period?

    A health flexible savings account, or health FSA, is an account that you contribute money to where the funds are dedicated ... Read Full Answer >>
  14. How does the grace period work on my Flexible Spending Account (FSA)?

    Some employers offer the grace period option for their employee's flexible spending account, or FSA. The grace period is ... Read Full Answer >>
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