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, as it is often called, must be sponsored by an employer. It allows you to put pre-tax money away to spend on qualifying medical expenses. That means you won't have to pay taxes on the money you spend for eligible healthcare costs. You can put away up to $2,550 a year pre-tax in your FSA. If you’re in the 33 percent tax bracket, you’ll avoid $840 a year in taxes. You can estimate your savings with this calculator offered by WageWorks. 

About three-quarters of large employers (200 or more workers) offer flexible spending accounts and 25 percent of firms with fewer than 200 workers have one, according to the Kaiser Family Foundation's 2015 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 December 31st. 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 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.

FSA Versus HSA

Your employer may also offer a health savings account. Those are only an option for people who have high-deductible health insurance, which have individual deductibles of at least $1,300 a year and $2,600 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 before the deductible).

Putting money into an HSA, which is also pre-tax, can 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 $3,400 annually for individuals and $6,750 for families.

Employers don’t have to set up HSA accounts for their employees in high-deductible plans, but about 63 percent do. You can also open one on your own. 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.