The deadline to use up flexible-spending account money is fast approaching — and when it’s gone, it’s gone.
Flexible-spending accounts, or FSAs, allow employees to pay for out-of-pocket medical expenses with tax-free dollars. The catch: The money is taken out of employees’ salaries at the beginning of the year, and they don’t get back whatever they leave unused. The deadline to use that money is the end of the year, though employees don’t have to claim those expenses until March.
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FSAs are becoming more popular. About 32 million people are expected to open FSAs in 2019, up from an estimated 29.6 million in 2018 and 27.4 million in 2017, according to market research firm Aite Group.
Americans forfeit an average of more than $400 million in tax-free dollars at the end of every year when they don’t use the money in their FSAs, according to FSAStore.com, an e-commerce site specializing in products that qualify for FSA spending. The average amount left in individual accounts is usually around $30, said Jeremy Miller, chief executive officer and founder of FSAStore.com.
But there are plenty of unexpected purchases that qualify for FSA spending, Miller said.
Here are a few:
• Flu shots
• First-aid kit
• Sunscreen
• Baby monitors
• Pregnancy kits
• Acupuncture mats
• Eye masks
• Contact lens solution
• Prescription sunglasses
• Reading glasses
• Neti pots
• Vaporizers
• Blood pressure monitor
• Batteries for hearing aid
• Kinesiology tape for athletes
• Crutch (if you’re injured)
• Hot and cold packs
• Condoms
• Neck pillows
• Back-pain relief kit
• Shoe insoles
• Acne light therapy systems
• Nausea relief bands
• Eye drops
• Breast pumps
• Compression socks
• Children’s nighttime underwear
• Prenatal or postnatal vitamins
• Foot circulation promoters
• Headache tablets
There are a few strategies employees cannot use to spend their FSA money: For example, they can’t pre-pay bills, nor can they use money to pay for medications or services from a previous year. FSA money can only be used for products and services bought in the current year of the plan, according to Healthcare.gov.
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Some employers offer a grace period of two and a half months during which they can spend FSA funds in the new year or allow employees to roll over whatever money they did not use, up to a maximum of $500, though neither is mandatory.
The limit for an FSA is $2,700 in 2019 (up from $2,650 in 2018), which comes to about $225 a month. Individuals who spend about that much, or are anticipating a medical procedure, may want to max out their accounts. Otherwise, it’s best to estimate how much is spent on doctor visits, medications and other out-of-pocket medical bills and contribute the total annual cost.
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