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FSAs can help with medical costs

I went to the dentist this week. Thanks to the hubby's workplace insurance coverage, I didn't have to pay the whole bill.

Medical insurance bill_123light via iStock_000016383988XSmall Photo by 123light via iStock

But I had to pay enough that I wished he had signed up for a flexible spending account.

Sometimes called a flexible savings account and usually referred to by tax and HR wonks by the acronym FSA, these workplace accounts allow you to put aside pretax money that you can use to pay expenses not covered by insurance.

FSA advantages -- and downsides -- are this week's Weekly Tax Tip.

Two types of accounts: Companies typically offer their employees two types of spending accounts. A dependent-care FSA allows a worker to set aside money to help pay some of the costs incurred in placing the kids in day care while mom and dad are at work.

With a medical FSA, a worker stashes money to pay for health care costs that aren't covered by the employee's health insurance. This includes co-pays and uninsured treatments such as vision care or chiropractic treatments.

FSA pros: Contributing to an FSA is easy. The money automatically comes out of your pay as a regular payroll deduction.

And, of course, there's the aforementioned tax advantage. Those payroll account deductions are on a pretax basis. That means less of your earnings are subject to income tax withholding.

FSA cons: But there are downsides.

If you don't use all the money in your FSA, you'll lose it.

Recent changes to the accounts, most notably restrictions on purchases of over-the-counter medications, also have made the plans less appealing.

And some folks find the process of submitting claims too time consuming and complicated.

Those are some of the reasons that many workers ignore their company's FSA option.

Granted, no tax break is perfect for everyone. But I know I could have used an FSA this week. And it wasn't the first time I had thought that.

This year we've been getting more bills from doctors than before because the hubby's insurance plan upped the deductible we must meet before its coverage kicks in completely.

So when enrollment season for workplace benefits opens in October, we'll be doing some numbers crunching to see how much money we want to put into a medical FSA to help pay next year's uncovered health care costs.

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