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 can use one only if you have job-based health insurance. With an FSA, you put pretax money away to spend on qualifying medical expenses not covered by your health insurance.

That means you never pay taxes on the money you spend for eligible healthcare costs. You can put away up to $2,650 pretax in your FSA for 2018, $50 more than in 2017. If you’re in the 33 percent tax bracket, you’ll avoid $840 per year in taxes. You can estimate your savings with this calculator offered by WageWorks. 

More About Health Insurance

About three-quarters of large employers (200 or more workers) offer flexible spending accounts, and 25 percent of firms with fewer than 200 workers that offer insurance have one, according to the Kaiser Family Foundation’s 2016 Employer Health Benefits Survey. That breakdown hasn’t changed much over the past 10 years.

Traditionally, the deadline to spend money in your account has been Dec. 31. But some companies now give workers until mid-March to spend FSA money. And since a change in IRS regulations, employers also have the option to let you roll 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.

From Acupuncture to X-Rays

People often rush at the last minute to make doctor appointments (co-pays are eligible). Buying eyeglasses at the end of the year is also common. But the list of what you can buy (PDF) with flexible spending account money is long.

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 its site is eligible for FSA spending, and items that need a doctor’s approval are clearly marked.


Your employer may also offer a health savings account. Those are an option only for people who have high-deductible health insurance, which have individual deductibles of at least $1,350 per year and $2,700 for a family. Average deductibles, though, are much higher. Individuals are paying an average $2,295 before insurance kicks in and families are ponying up $4,364 on average, according to the Kaiser Family Foundation.

With a high-deductible plan, you must pay your deductible up front before your insurance begins to cover some of the costs. (Some preventive services are covered at 100 percent before the deductible.)

Putting money into an HSA, which is also pretax, is another way to ease the pain of your out-of-pocket costs. Unlike a flexible spending account, there is no deadline to use 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 $3,450 annually for individuals and $6,900 for families. 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. The employer contribution averages $608 for single coverage and $1,086 for a family plan, according to the Kaiser Family Foundation. You can also open one on your own if you buy your own insurance and have a high-deductible plan. But if you have a high-deductible health plan through your employer—which is becoming more common—you can’t have both an FSA and an HSA.