Flexible Spending Accounts are valuable tax saving tools when offered by employers and come in two varieties, Medical or Healthcare Flexible Spending Account and the Dependent Care Flexible Spending Account.
Medical Flexible Spending Account
Employees use their Medical Flex account to pay for medical, dental, vision, chiropractic, and prescription copays, and co-insurance. In addition to the above “out of pocket expenses” a Medical FSA has a cash-flow benefit in that once an employee’s annual contribution election begins deducting from their paycheck, the entire amount elected can be “spent” on qualified expenses at any time, prior to fully funding the annual contribution.
Dependent Care Flexible Spending Account
Dependent Care Flex accounts while offering comparable tax savings percentages can provide participating employees, very lucrative tax savings since these types of expenses can be significant. Only a state qualified provider of dependent care can be used for services, whether it be child day care, elder day care, or after-school care.