Flexible Spending Accounts (FSAs)
Enjoy tax savings when you use healthcare and dependent care Flexible Spending Accounts (FSAs), administered by HealthEquity. FSAs allow you to set aside pre-tax dollars to pay for qualified healthcare and/or dependent care expenses. You decide how much to contribute each year during the enrollment period, up to the annual maximum then this amount is divided evenly and deducted from each paycheck throughout the year.
FSAs are “Use It or Lose It” accounts. IRS rules require that you use the funds in your FSA each year or forfeit them. Plan carefully when determining your annual FSA elections because you cannot change them midyear unless you have a qualified life changing event that allows you to make an election change.
How Much Could You Save?
Flexible Spending Accounts (FSAs) are one of the easiest ways to reduce your taxable income and keep more of what you earn. When you contribute to an FSA, the money you set aside for eligible healthcare expenses is not taxed—meaning every dollar goes further. For example, let’s say Tom sets aside $2,000 in his FSA for the year. Normally, he’d pay $560 in federal income tax, $100 in state income tax, and $153 in FICA taxes on that amount. But by using his FSA, Tom avoids all those taxes and saves $813. That’s money he can use for things like doctor visits, prescriptions, or medical supplies—without it ever being taxed. FSAs don’t just help with budgeting—they help you make the most of your paycheck.
Healthcare FSA
A Healthcare FSA lets you use pre-tax dollars for certain IRS-approved medical care expenses not covered by your insurance plan. For example, cash that you now spend on deductibles, copayments or other out-of-pocket medical expenses can instead be placed in the health care FSA on a pre-tax basis.
For 2025, the HCFSA maximum contribution limit is $3,300.
Requirements of a HCFSA
- It is important that you estimate your expenses as you will have until March 15, 2026, to incur expenses against your 2025 FSA. Any money left will be forfeited.
- Eligible expenses include the following. More information can be found at www.irs.gov
- The portion of covered expenses not paid by the health care plan such as deductibles, copays or coinsurance
- Dental plan deductibles and coinsurance
- Eyeglasses and contact lenses
- You are not eligible to participate in the HCFSA if you are enrolled in a Health Savings Account.
- You may not claim any expenses reimbursed from this account as an itemized deduction on your tax return.
Dependent Care FSA
A Dependent Care FSA allows you to contribute pre-tax dollars to pay for eligible dependent care expenses. These expenses typically include daycare, preschool, before and after school programs and care for elderly dependents.
The maximum amount you may contribute each year is $7,500 (or $3,750 if married and filing separately).
Requirements of a DCFSA
- A DCFSA should not be elected in anticipation of a future birth/adoption. You will have the opportunity to enroll in a DCFSA or change your election when the event occurs.
- When you incur an eligible expense, you can submit your receipt to HealthEquity for reimbursement.
- If your spouse participates in a DCFSA and you file taxes jointly, the combined total of your reimbursements cannot exceed $5,000 annually.
- Both you and your spouse must be employed (unless your spouse is a full-time student or incapable of self-care) and contributions are limited to the income of the lower paid spouse.
- Money not claimed for the plan year will be forfeited and any dependent care expenses incurred while on a leave of absence are not reimbursable.
Without an FSA, Tom Would Pay
- 28% in federal income tax: $560 savings
- 5% in state income tax: $100 savings
- 7.65% in Federal Insurance Contributions Act (FICA) tax: $153 savings
His total tax savings for the year with an FSA: $813
By using an FSA, Tom reduces his taxable income—and saves $813 for the year.