Last night and today I have been rounding up receipts and sending them off for reimbursement from our HealthCare Flexible Spending Account.
Perhaps you have heard of this account or seen it offered by your employer. It is a GREAT way to save on taxes.
There are 2 separate accounts that work very similarly. One is for medical / health expenses and one is for dependent care expenses.
Today I'll tell you how the medical one works and tomorrow I'll discuss the one for Dependent Care and how it differs.
1. Each year, you decide how much money (up to $5000) you and your family might spend on medical expenses not covered by insurance - things such copayments, over the counter medications (Tylenol, Advil, etc.), Lasix surgery, etc.
2. Your employer then divides the amount you choose by the number of paychecks you will receive per year and that amount is deducted from each paycheck pre-tax and placed into an account for you.
3. Once you have some qualified medical expenses you can then be re-imbursed the expense cost OR you may be issued a debit card that you can use directly for these expenses.
4. You have the entire year to use up the amount you choose. Some employers allow a grace period that allows you to incur expenses into March of the next year and apply that toward your remaining balance.
So you say how does this benefit me??
- The money you set aside is taken out of your paycheck pre-tax -- essentially, you are getting this money tax free - which means that you are extending the buying power of your money. If you are in the 15% tax bracket, you get 15% more money to spend on medical items.
- If you have a high cost medical procedure that your insurance company will not cover - say Lasix - you can have that surgery and receive re-imbursement immediately after the surgery from your account - then the money to pay for it is taken out of your paycheck throughout the year.
Some Words of Caution- Don't overestimate your amount - if you don't use it by the end of the year, you lose it. REPEAT: YOU LOSE IT!!!
- Save your receipts - you may need them to substantiate some of the expenses or you may need to send them in for re-imburement.
- Be prepared for that money to come out of your paycheck - it's not gone forever, you WILL get it back but you will not have it to spend on daily living expenses
- Rules change when you leave an employer - check with your employer as soon as you know you are leaving to find out how long you have to spend your balance and how long you have to turn in receipts.
Hey, did this help? If it did, let us know!!!
Today's Negotiating Tip:There is a big difference between haggling and negotiating. Haggling is all tactics while negotiating is strategic. Always negotiate. When you know you want to buy something, learn about it, know its worth, know what options are available, understand who you are negotiating with and have creative solutions ready for standard salesperson tactics. You'll come out a winner!
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