With ever-rising healthcare costs, many Americans are turning to Flexible Spending Accounts (FSAs) to help offset the expenses. FSAs allow individuals and families to save money on healthcare expenses by setting aside pre-tax dollars in an account to use for eligible medical expenses. However, many people are not maximizing their FSA benefits because they are not familiar with the rules and regulations surrounding the accounts. Below, we'll share some tips and tricks for smart spending with FSAs to help make best use of this tax-free health benefit.
- Know What Expenses are FSA-approved
The most important aspect of your FSA benefits is understanding what expenses are FSA-approved. The IRS sets the overarching guidelines for qualified medical expenses which can include a wide range of medical and dental services and associated co-pays, as well as products such as eyeglasses and contact lenses, first aid kits, and thousands of products that are found on BuyFSA.com (where all products are guaranteed FSA-approved). To ensure that you are making FSA-approved purchases, shop with your FSA card. Or if you’d prefer to pay with your personal credit card, make sure to shop a dedicated site for FSA products to avoid surprises when it comes to filing reimbursement claims.
- Take Advantage of FSA Debit Cards
Many FSA plans offer debit cards that can be used to pay for eligible expenses directly from your account. FSA cards only transact over eligible products and services and allows accountholders to spend their funds without paying out-of-pocket and waiting for reimbursement. Keep in mind that not all expenses will be approved for payment with your FSA card. Some expenses may require additional documentation such as a letter of medical necessity. If you want to be sure all your purchases are reimbursed without a hitch, shop on on the BuyFSA app with your FSA card or credit card to have every purchase FSA-approved, guaranteed.
- Use FSA Funds for Preventive Care
Preventive care is an important part of staying healthy, and many preventive care services are approved for FSA reimbursement. This includes expenses such as annual physical exams, flu shots, and cancer screenings. By using your FSA funds for preventive care, you’ll take one step toward minimizing your long-term health expenses.
- Consider Alternative Therapies
Many alternative therapies are approved for FSA-reimbursement such as acupuncture, chiropractic care, and homeopathy. If you suffer from chronic pain or other health issues, alternative therapies can play an important role with your personal health. Using your FSA funds to pay for these therapies can help you manage your symptoms and expand care to treatments outside of traditional Western practices.
- Don't Forget About Dental and Vision Expenses
Dental and vision expenses are often overlooked when it comes to FSAs, but they can be some of the most expensive healthcare costs. Many FSA plans allow for reimbursement of dental and vision expenses, including routine exams, glasses, and contacts. By using your FSA funds for these expenses, you can save money on essential products and services that you may have already been purchasing out-of-pocket.
- Keep Track of Your Credit Card Expenses
It’s important to keep track of your regular credit card health expenses throughout the year. This will help you stay on budget and ensure that you are making eligible purchases. Keep all of your receipts and documentation in one place, and be sure to review your account regularly to make sure you’re aware of your FSA balance throughout the year.
There are several ways to track your FSA expenses, including:
- Keeping all receipts and invoices for FSA-eligible purchases
- Using an online FSA tracker or mobile app to keep track of expenses
- Logging expenses in a spreadsheet or budgeting tool
Keeping track of your expenses allows for easy reimbursement requests and ensures that you are getting the most out of your FSA benefits each year when selecting your FSA contribution.
- Check with Your FSA Provider Before Making Purchases
While some FSA-eligible expenses are fairly standardized, it's important to check with your FSA provider before making any product or service purchase. Some FSA providers require a prescription or letter of medical necessity from your healthcare provider for certain purchases.
If you want to avoid the extra steps in ascertaining the FSA eligibility of any given product, shop BuyFSA where all products are FSA-approved.
- Use your FSA early-on in the plan year
When you elect a dollar amount to contribute into your FSA, it will immediately become available at the start of your plan year. Many don’t realize that their employer is actually giving a cash advance and the employee “pays back” the contributed FSA dollars throughout the year. Your employer is effectively giving you a free loan. Example: If you contribute $1000 into your FSA, the account dollars will be available on day 1. Each pay period, your employer will deduct a prorated amount of that $1000 which is evenly distributed throughout the entire year. So you’re not actually paying back the $1000 tax-free dollars until your last paycheck of the year.
When spending your FSA dollars early-on in the year, you’ll ensure funds aren’t lost when they expire at the end of the plan year. However, sometimes these funds are left unspent due to unforeseen circumstances and when this happens, find sites like BuyFSA.com (and the BuyFSA app) to find FSA-approved products to purchase prior to expiration.
- Use Your FSA Funds Before the Deadline
The most common mistake people make with their FSAs is waiting until the end of the year to spend their funds. The FSA use-it-or-lose-it rule means any funds you don’t use by the end of the year will be lost for good. This is why you should set a plan and budget each year to make sure you are using your funds for necessary expenses.
A good way to plan is to start by estimating your healthcare expenses for the year and contribute to your FSA accordingly. Make a list of eligible expenses that you anticipate needing, such as prescription medications or medical procedures, and prioritize them based on urgency. This will help you avoid those last-minute purchases and ensure your FSA dollars are well-spent.
- Ideas for how to spend leftover funds when your FSA deadline is approaching
Elective Procedures - If you're planning on an elective procedure such as LASIK eye surgery, consider using your FSA funds to pay for it. Make sure that the procedure is scheduled within your plan year to have your expenses reimbursed.
Dependent care expenses – Aside from spending on yourself you can use your FSA funds to pay for approved expenses for your spouse, children or dependents such as elderly parents. Examples include daycare or in-home care expenses.
Shop FSA-approved products online - Shop the large selection of FSA-approved items on BuyFSA.com and the BuyFSA app. Everything on BuyFSA is guaranteed FSA-eligible and can be purchased with your FSA debit card.
Flexible spending accounts can be a valuable benefit for managing healthcare expenses and maximizing tax-free savings. By understanding the eligible expenses, contribution limits, the reimbursement process, as well as implementing smart spending strategies, you can make the most of your FSA benefits and save money on every-increasing healthcare costs.