There are three types of Flexible Spending Accounts; the Healthcare FSA, the Limited Expense Healthcare FSA, and the Dependent Care FSA. FSA’s are “use it or lose it” spend accounts that are offered by employers. You cannot choose to open one by yourself. FSA’s allow you to put away money tax-free for qualified expenses that you expect throughout the year.
FSA’s typically operate on reimbursements. While your money is taken out of your paycheck pre-tax on a monthly basis, you must pay for qualified expenses out of pocket before requesting a reimbursement. This is typically done through an easy-to-use online form that asks for a statement or receipt.
Healthcare FSA (HCFSA)
An alternative to the HSA (Health Savings Account), the FSA is a spend account designed to help you budget for healthcare expenses. For 2022, participants may contribute up to an annual maximum of $2,850. For 2023, that limit is $3,050.
Limited Expense Healthcare FSA (LEX HCFSA)
The LEX HCFSA is an FSA designed to help you budget for vision and dental expenses. This has the same limit as the HCFSA, but allows you to rollover $570 into the next year if you re-enroll in the account.
Dependent Care FSA (DCFSA)
This is a great benefit to have if you have children and a career. For both 2022 and 2023, the annual contribution limit is $5,000. This limit is only $2,500 if you are married, but file for taxes separately. If you choose to maximize your contributions at $500 per month, or $5,000 per year, but only spend $3,000 on dependent care, you just lost $2,000. A dependent care FSA can be used for the following qualified services.
- Care for Children under 13 years old
- Pre-School & Daycare
- Babysitting/Nanny
- Before & After-School Programs
- Summer Camp
- Care for your spouse or a relative who is physically or mentally incapable of self-care and lives in your home
- Adult Daycare
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