Putting money into a flexible spending account is a smart way to reduce your taxable income. But time is running short if you haven’t spent the money yet.

An FSA must be sponsored by an employer, so you'll only have one if you have job-based health insurance. Most employers have a use-it-or-lose it policy that requires you to spend the money by Dec. 31.

Some companies give workers until mid-March to spend FSA money on eligible expenses. Other employers let you carry over $500 to use in the coming year. However, they can’t offer both options. Talk to your human resources department to find out your company’s policy.

With an FSA, you put pretax money away to spend on qualifying medical expenses not covered by your health insurance.

More on Managing Healthcare Costs

That means you never pay taxes on the money you spend for eligible healthcare costs. In 2018, you could fund up to $2,650 in an FSA, and in 2019 you'll be able to put away another $50, for a total of $2,700 pretax dollars. If you’re in the 24 percent tax bracket, you’ll avoid $648 per year in taxes if you put away the maximum amount. You can estimate your savings with this calculator offered by WageWorks. 

If you have job-based insurance, you're likely to have an FSA option. Half of all firms with 25 or more workers that offer health insurance have one, and among companies with 200 or more employees, three-quarters offer FSAs, according to the Kaiser Family Foundation’s 2018 Employer Health Benefits Survey

From Acupuncture to X-Rays

People often rush at the last minute to make doctor appointments (copays are an FSA-eligible expense). Buying eyeglasses and visiting the dentist at the end of the year are also common ways to use up the funds. But the list of what you can pay for with FSA money is long, and much of it can be found at your local drugstore. So don't worry if you still have a big chunk of money left in the account. There are plenty of ways to use it up, from acupuncture, arch supports, and breast pumps to lip balm, medical devices, and sunscreen. 

And if you have a prescription or doctor’s note, there are additional items and treatments that are covered, such as acne medicine and sleep aids.

An easy way to see what qualifies is to go to FSAStore.com. Everything sold on the site is eligible for FSA spending, and items that need a doctor’s approval are clearly marked.

FSA vs. HSA

Your employer may also offer a health savings account (HSA), another way to put away pretax money for future healthcare costs. You can't have both an HSA and an FSA with employer insurance.

And an HSA is an option only for people with a high-deductible health plan (HDHP), which have individual deductibles of at least $1,350 a year and $2,700 for a family. A deductible is the amount you must pay before insurance begins to cover some of your healthcare bills. (Some preventive services are covered at 100 percent before the deductible.)

But an HSA is more flexible than an FSA. Unlike an FSA, there is no deadline to spend the money in the account, and if you leave your employer, the account goes with you. You can put away more in an HSA, too: up to $3,500 annually for individuals and $7,000 for families in 2019. You can contribute an additional $1,000 per year if you are 55 or older.

Employers don’t have to set up HSA accounts for their employees in high-deductible plans, but about half of those that do make a contribution to the account. You can also choose a different HSA if you don't like your employer's option. And if you buy your own insurance and have a high-deductible plan, you can always open one on your own.