What is a 'Flexible Spending Account - FSA'

A Flexible Spending Account (FSA) is 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.

RELATED TERMS
  1. Dependent Care Flexible Spending ...

    A flexible spending account (FSA) designed to provide tax-exempt ...
  2. Financial Services Authority - ...

    Regulating body for all providers of financial services in the ...
  3. Employee Savings Plan

    A pooled investment account provided by an employer that allows ...
  4. Additional Voluntary Contribution ...

    An extra allocation of funds to a retirement savings account ...
  5. Payroll Deduction Plan

    A contribution plan in which an employer deducts a specified ...
  6. Account History

    All activity within an account, usually since inception. In a ...
Related Articles
  1. Insights

    Healthcare FSAs Increase Your Personal Savings

    This benefit could give you a return this year that puts many other investments to shame.
  2. Insurance

    Using a Dependent Care Flexible Spending Account

    A dependent care flexible spending account can help you care for loved ones who need your help.
  3. Insurance

    Benefits Of A Dependent Care Flexible Spending Account

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

    What Does A Flexible Spending Account Let You Buy?

    A healthcare FSA will help you pay your medical expense with pre-tax dollars – just not all of them. Here's how to tell which costs are covered.
  5. Financial Advisor

    Payroll Deductions Pay Off

    Find out how you can bypass or defer taxes on thousands of dollars each year.
  6. Financial Advisor

    HSAs and FSAs: How to Decide Between Them

    FSAs and HSAs are both excellent ways to help cover a portion of medical costs with pre-tax dollars. Here's how to decide between the two.
  7. Insurance

    How to Maximize the Use of Your HSA

    A health savings account is an often misunderstood financial planning tool.
  8. Insurance

    Your Flex Spending Dollars: How to Use Them All

    Your flexible spending account is about to expire. Don't throw money away; here's how you can spend every cent (or roll it over).
  9. Financial Advisor

    HSA vs. FSA: Navigating the Alphabet Soup

    HSA vs. FSA: Here's a cursory view of these two types of workplace savings accounts to help you make the proper decision in making your elections.
RELATED FAQS
  1. Do flexible spending accounts (FSA) funds roll over?

    Learn more about how flexible spending accounts (FSAs) are established, policies on rolling over funds, and what costs can ... Read Answer >>
  2. Does money in a Flexible Spending Account (FSA) roll over?

    Get the latest information regarding current IRS regulations on how much money can be carried over from one year to the next ... Read Answer >>
  3. Are Flexible Spending Account (FSA) expenses tax deductible?

    Discover how flexible spending account expenses are not tax deductible but the accounts do have many other benefits for employees. Read Answer >>
  4. Are Flexible Spending Account (FSA) contributions tax deductible?

    Discover if contributions to your Flexible Spending Account (FSA) are tax deductible. Learn how it can reduce your taxable ... Read Answer >>
  5. Can a Flexible Spending Account (FSA) be used for dental procedures?

    Learn about Flexible Spending Accounts (FSAs) and which medical and dental expenses are considered qualified medical expenses ... Read Answer >>
  6. Does a Flexible Spending Account (FSA) cover braces?

    Learn about Flexible Spending Accounts (FSAs) and how funds from these accounts can be used to cover costs associated with ... Read Answer >>
Trading Center