Does your employer offer flexible spending accounts? They’re a convenient way to save money for a variety of dependent and medical expenses. As a single adult, you may not have children or huge medical expenses. Should you open a flexible spending account?
What is an FSA?
A flexible spending account allows you to save money for medical expenses that aren’t covered by your health insurance. It also covers certain dependent care expenses. Set it up through your employer, and take advantage of tax savings since FSA funds are exempt from payroll taxes.
How Does an FSA Work?
When you sign up for an FSA, your employer sets money aside from each of your paychecks. New rules for 2015 allow you to contribute up to $2500 annually into your FSA. Previously, unused FSA funds expired at the end of the year, but the Patient Protection and Affordable Care Act now allows you to transfer $500 in unused FSA funds into the next year.
What Expenses are Covered?
The money you save in an FSA can be used for numerous expenses. Dependent care is one of the most popular expenses FSAs cover. You’ll be able to save up to $5,000 and pay for day care expenses required by dependents younger than 13 or any child with a physical or mental disability that prevents him or her from providing proper self-care.
As a single adult, you might not have children, though. Then use the money to pay for dependent expenses related to the care of your senior parents or grandparents. As long as you claim your older family members on your taxes, you can use FSA funds to pay for their care.
So what if you don’t have kids or older parents? Consider opening an FSA anyway and use the money to pay for medical expenses like those listed on IRS publication 502. They include:
- Copays
- Deductibles
- Medication
- Crutches, bandages and other medical devices
- Dental and vision expenses
An FSA allows you to save money each week for dependent care or medical expenses. As a single adult, you may not need an FSA, especially if you don’t have children, senior parents or costly medical needs. However, this tool is a wise and highly recommended way to cover expenses that are unpaid by your insurance policy. Talk to your human resources manager or insurance agent today about opening an FSA.
