The tax deadline just passed, and it?s time to check the balance on any flexible spending accounts (FSA) or health savings accounts (HSA) that you contributed to so far this year. If you don?t have a grace period on your employer’s Flexible Spending Plan and have a balance left in your account, plan to make a trip to the dentist, drug store, doctor, or optometrist. Some plans allow $500 to carry over to next year and others require you spend the entire balance before the end of the year (applies to FSAs only). Check with your benefits provider to learn about the specifics of your program.
What’s the primary difference between Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)?
- FSAs do not require the use of a “high deductible health plan” to deduct contributions from your taxable income (a deductible of at least $1,350 for an individual or $2,700 for a family is considered “high deductible”). The trade off of having a lower deductible is that you typically have to spend the dollars in your FSA on health care expenses before the end of the year or you lose them.
- HSAs require that you be enrolled in a “high deductible health plan” to deduct your contributions from taxable income. In exchange for paying more out-of-pocket expenses, you are allowed to rollover the savings in your HSA indefinitely.
What is the maximum contribution you can make to an FSA and HSA this year?
- You are able to contribute $2,700 to your employer’s Flexible Spending Account in 2020 via payroll deduction (each spouse must use their own employer’s plan but each may contribute up to $2,700)
- You are able to contribute $3,500 per individual or $7,000 per family to a Health Savings Account prior to your tax filing date (April 15th). This account works great if you save regularly or choose to make a last minute contribution.
- The maximum contribution limits include your employer’s contribution if they offer it (either FSA or HSA)
Tip courtesy of IRS.gov[i]