FSA Tax Savings
Flexible Spending Accounts (FSAs) are a valuable part of the benefits package provided to you by your employer. They allow you to set-aside money for eligible healthcare and day care expenses on a pre-tax basis, saving you anywhere from 25% to 45% (depending on your tax bracket)! Click here for a printable version of why you should enroll in a Flexible Spending Account today.
FSAs allow you to pay for eligible expenses with gross (pre-tax) instead of net (after-tax) income leaving a smaller amount of income subject to taxation. You pay less in income taxes and your spendable income increases. The following table illustrates potential tax savings:
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Without an FSA
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With an FSA
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Advantages
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Gross Pay:
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$45,000
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$45,000
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|
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Contribution to FSA:
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$0
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- $2,500
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Contribution is Pre-Tax
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Taxable Income
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$45,000
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$42,500
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Less Taxable Income
|
|
Estimated Taxes
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-$14,131
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-$13,119
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Less Paid in Taxes*
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Income after taxes
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$30,869
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$29,381
|
|
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Eligible FSA expenses
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-$2,500
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-$2,500
|
|
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FSA Reimbursement
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$0
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$2,500
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Tax Free
|
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Net income after taxes and expenses
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$28,369
|
$29,381
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Extra Income to You!
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|
Savings from an FSA:
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$0
|
$1,012
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Gain From an FSA!
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* Based on the 2011 Federal taxable income tax rate for Single filing, FICA taxes of 7.65% and an estimated State/Local tax rate of $7.35%
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Extra income by participating in an FSA: $1,012
Dependent Daycare FSAs
Dependent Daycare FSAs allow you to save on child (or elder) care expenses such as babysitting, daycare or in-home care while you and you spouse are working. Depending upon your income, you can save more than federal tax child credits. You can contribute $5,000 for a married couple filing jointly or a single parent; or $2,500 for a married person filing separately.
Healthcare FSAs
Healthcare FSAs cover a wide variety of eligible out-of-pocket (not covered by health insurance) expenses for you and your family. Please note that as of 1/1/2011, OTC medicines, in general, are no longer eligible for reimbursement due to healthcare reform.