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. Long-Term Care (LTC) Insurance

    Coverage that provides nursing-home care, home-health care, personal ...
  3. Health Savings Account - HSA

    An account created for individuals who are covered under high-deductible ...
  4. Medicaid

    A joint federal and state program that helps low-income individuals ...
  5. Custodial Care

    Non-medical care that helps individuals with his or her activities ...
  6. Dependent Care Benefits

    Benefits provided by an employer to an employee for use in caring ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. Other than my savings account, what other types of holdings compound my interest?

    Investors and savers can use the power of compounding interest to accumulate wealth over time. Unlike simple interest that ... Read Full Answer >>
  4. What are the pros and cons of online checking accounts?

    Online banking offers a convenient alternative to keeping your checking account with a brick-and-mortar bank. With an online ... Read Full Answer >>
  5. What is the most effective way to write a successful budget?

    Before you begin writing a budget, gather all of your bank statements, bills and credit card statements for a given month. ... Read Full Answer >>
  6. Should I use a deferred tax asset for all of my retirement funds?

    Tax-deferred retirement saving vehicles, such as traditional IRAs, 401(k) plans and annuities, are attractive to savers who ... Read Full Answer >>
Related Articles
  1. Retirement

    Payroll Deductions Pay Off

    Find out how you can bypass or defer taxes on thousands of dollars each year.
  2. 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.
  3. 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.
  4. Home & Auto

    Fighting The High Costs Of Healthcare

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

    Tax Tips For The Individual Investor

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

    Healthcare FSAs Increase Your Personal Savings

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

    Selecting The Right Mix Of Insurance Benefits

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

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  9. Options & Futures

    Returning To Work: Is It Right For You And Your Family?

    Returning to the workplace can create some unique stresses. In the end, does the additional income justify the extra expenses?
  10. Savings

    Explaining Checking Accounts

    A checking account is an account at a financial institution, usually a bank, that allows for deposits and withdrawals.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center