Flexible Spending Account - FSA

A A A

DEFINITION

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

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 funds to employees ...
  2. Medicare

    A U.S. federal health program that subsidizes people who meet one of the following ...
  3. Medicaid

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

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

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

    An account created for individuals who are covered under high-deductible health ...
  7. Dependent Care Benefits

    Benefits provided by an employer to an employee for use in caring for dependents ...
  8. Average Revenue Per User (ARPU)

    A measure of how much income a business generates, given the size of its customer ...
  9. Money Market Account

    An interest-bearing account that typically pays a higher interest rate than ...
  10. Compound Interest

    Interest calculated on the initial principal and also on the accumulated interest ...
Related Articles
  1. Payroll Deductions Pay Off
    Retirement

    Payroll Deductions Pay Off

  2. Healthcare FSAs Increase Your Personal ...
    Retirement

    Healthcare FSAs Increase Your Personal ...

  3. Selecting The Right Mix Of Insurance ...
    Home & Auto

    Selecting The Right Mix Of Insurance ...

  4. Tax Tips For The Individual Investor
    Retirement

    Tax Tips For The Individual Investor

  5. 10 Money-Saving Year-End Tax Tips
    Taxes

    10 Money-Saving Year-End Tax Tips

  6. Fighting The High Costs Of Healthcare
    Home & Auto

    Fighting The High Costs Of Healthcare

  7. Returning To Work: Is It Right For You ...
    Options & Futures

    Returning To Work: Is It Right For You ...

  8. Job Hunting: Higher Pay Vs. Better Benefits
    Retirement

    Job Hunting: Higher Pay Vs. Better Benefits

  9. Benefits Of A Dependent Care Flexible ...
    Personal Finance

    Benefits Of A Dependent Care Flexible ...

  10. Rules For Having A Health Savings Account ...
    Insurance

    Rules For Having A Health Savings Account ...

comments powered by Disqus
Hot Definitions
  1. Cash and Carry Transaction

    A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.
  2. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  3. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  4. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  5. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  6. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
Trading Center