Wednesday, January 12, 2011

Using a FSA to Save on Health and Childcare Costs

FSA plans are a great way to save money if your health care or childcare costs are through the roof. Up to $5,000 a year can be set aside for your FSA, the amount set aside is pretax which will allow you to save more money.

For example if you made $30,000 a year and your taxed at 32%, if you put $5,000 in your FSA you would save $1,600 a year from your FSA.

Your FSA deferral can be using towards childcare, health care costs, and dependent care costs.

2 comments:

  1. I'm in the first year of using an FSA account for child care. My withholding amount is set to equal $5000 in equal distributions through the year. I wonder what your thoughts are for triggering reimbursement? Are there tax implications for reimbursements -- should they be triggered through out the year, or as a lump sum?

    pf from lwil.blogspot.com

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  2. Hi PF! It will depend on your employee and what your using the FSA towards. For example some use it to buy prescriptions and some companies have a debit card linked to your FSA so you can deduct the amount yourself.

    For childcare it requires receipts and submitting it to your FSA. Each company is different so you would have to contact your HR.

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