Daniel Stewart

What Are the Main Types of Flexible Spending Accounts?

Flexible spending accounts are a type of employee-sponsored accounts that help you to save more by allowing you to set aside tax-free money that you can use later on specific out-of-pocket medical care expenses that aren't covered by your current health insurance plan. While there are limits on how much you can put into your account each year, you can still enjoy substantial tax savings. Your employer can also contribute to your HSA as part of your benefit package. Learning more about the types of FSA accounts that are available makes it possible for you to take every advantage you can of this money-saving perk.

Set Up a Health Care FSA

This is the most common type of FSA that you'll hear about when you ask "how does a FSA work?" In 2022, the contribution limit for this type of account will be $2,850. If your spouse has their own account, then they can also contribute their maximum limit into it. You can use these funds to pay for out-of-pocket medical costs such as co-pays, deductibles and supplies such as blood sugar testing kits. You'll also want to note that you can use these funds on any dependents that you claim on your tax return.

Use a Dependent Care FSA to Ease Financial Burdens

This type of account is meant to help you cover the costs involved with providing care to a child under the age of 13 while you work or look for employment. Senior and disabled care are also covered under this FSA account. For this one, the people you are covering must be dependents who live with you for the majority of the year. Married couples can contribute $5,000 a year, while a single parent or caregiver can contribute $2,500.

Round Out Your Savings With a Limited Purpose FSA

You'll need to already have an HSA in place before you can set up a limited purpose account. Once you do, you can use this to pay for out-of-pocket vision and dental expenses. Keep in mind that one of the things you'll need to know about how does a FSA work is that you can't double dip. You'll need to pick either your HSA or your FSA account for covering a specific expense.

FSAs are another type of savings account that you can use to save more money and set aside funds for covering health care expenses. With health care costs increasing, taking advantage of these important benefits helps you plan for the future and feel confident about having what you need if a medical issue arises.

Author Resource:-

Daniel Stewart has been helping people with their money management and personal finance with over 15 years' experience in business finance. You can find his thoughts at health investment blog.