Rising healthcare costs have been well documented. A healthcare flexible spending account is a great way to save, as you can effectively get many of your healthcare related expenses tax-free.
Know your account
First, make sure you understand whether your healthcare account is an FSA (Flexible Savings Account) or an HSA (Health Care Savings Account). You can carry a balance from year to year in an HSA, but the drawback is you must be enrolled in a high-deductible insurance plan.
FSA’s can be used with any type of health insurance. There is one major drawback though. You have to use all the money you put in each year prior to December 31st or you lose it. You can’t carry money over from year to year in an FSA.
Check your balance
If you have a Flexible Spending Account, it is very important to check your balance before the end of the year. If you have unused dollars in your FSA, then you want to make sure you use up those dollars before the end of the year. It is your money so you want to make sure you don’t lose it.
So what can you do if you find yourself needing to spend some health care dollars?
Some ideas to spend those last dollars
- Get a flu shot
- Been a while since you had a physical? Schedule one.
- Make sure you have refills for all your prescriptions
- Schedule a visit with your chiropractor
- Hearing aids
- Get a jump on the New Years Resolutions and enter a stop smoking program
- If it’s been 6 months, schedule a checkup
- Do you have some dental work that you have been putting off? Get it done; just make sure you can be billed by December 31.
- Schedule an exam if it has been a while
- Buy some extra disposable contacts
- Get a pair of prescription sunglasses
- Corrective vision surgery like LASIK.
Make sure that you will be billed prior to December 31 so that the expenses are eligible to be deducted. You do not have to file for reimbursement by December 31, but you do need to make sure you are billed by the end of the year for the expense to be eligible.
Some things that you can’t claim
Unfortunately these are some common things that you cannot use FSA money to purchase.
- Over the counter drugs
- Health club dues
- Weight-loss fees unless it is part of a specific medical treatment
- Teeth whitening
- Nutritional supplements
For a full list of what is eligible and what is not you can check out IRS publication 502. Alternatively, your HR representative at your place of work may be able to provide you with a list of eligible expenses.
Don’t get caught throwing away money
I love FSA’s especially if you have predictable, recurring medical expenses. It is a great way to save. But you must remember that if you don’t use up the money, you’ll lose your savings benefit.
If you find yourself in a position where you are struggling to use up your FSA each year, then you might need to adjust the amount you save every year. With an FSA it is always much better to underestimate how much you need to save. This is why it works best if you have predictable expenses.
If you have a Flexible Spending Account, take a few minutes today to verify that you have used up all of your funds. If you haven’t, consider how you can spend your remaining funds.
Photo credit: Tax credits (creative commons)