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New FSA $500 Carry Over

New FSA $500 Carry Over

by admin | Nov 1, 2013 | Health Care Reform, Health Care Refrom, HSA, Tax

flex savings account

The New FSA Carry Over. U.S. loosens FSA rules and will allow a carry over of up to $500 to the next year. The use-it-or-lose-it rule scared off  many workers, with just 25 percent of eligible workers participating in healthcare FSAs.

According to a WSJ article “Consumers Can Roll Over $500 in an FSA”, about 14 million families use FSA accounts and the new plan would be a welcome relief for them. That’s because until now any unused funds used to go the employer, so people were forced to use up the funds, especially toward the end of the year by spending on frivolous things. Moreover, many were fearful of signing up, lest they lose any unused amount.

The most recent prior change to FSA this year was a limit of $2,500 that a worker can set aside.

What is a Health FSA?

The health care Flexible Savings Account (FSA) can reimburse you or help you pay for eligible health care expenses not covered by your health plan. The portion of your paycheck you put into your FSA is taken out before you pay federal income taxes, Social Security taxes and most state taxes. It’s a great way to save money.

Example FSA Savings

Without FSAWith FSASavings
Family co-payments$80$48$32
Contact lenses and solution$400$240$160
Over-the-counter items$300$180$120
Braces and dental co-insurance$2,520$1,512$1,008
Yearly Total:$3,300$1,980$1,320

Tax Savings

Generally, contributions you make to your FSA are not subject to federal income taxes or social security taxes. In most instances, there are no state taxes taken out either. The amount you may save depends upon:

  • The amount you put into your FSA
  • The tax percentage you would normally pay on that money (tax bracket)

Let’s say you want $2,000 taken out of your paycheck this year to put into your FSA. The money you direct to your FSA is taken out of your check before taxes are taken out. That reduces your taxable income by $2,000.

Let’s say you normally pay 30 percent in federal, social security and state taxes on your income. In this example, you would enjoy a tax savings of 30 percent of the $2,000. In other words, you could get a $600 tax savings on the $2,000 you directed to your FSA.

This example should not be taken as tax advice. See a tax advisor to seek the best advice for your situation. To see how much you may save, check out Aetna’s FSA Savings Calculator.

RESOURCES:

FSA Eligible Expenses and Items

FSA FAQ

Qualified Expenses

Aetna  FSA Savings Calculator.

HRA Calculator

 

Is your FSA compliant?  Which pre-tax qualified HSA, FSA, HRA spending card is right  is right for you ? Please contact our team at Millennium Medical Solutions Corp (855)667-4621 for immediate answers..   Stay tuned for updates as more information gets released.   Sign up for latest news updates.
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