What is a Flexible Spending Account (FSA)?

A flexible spending account (FSA) is a type of savings account that provides the account holder with specific tax advantages. An FSA is sometimes called a “flexible spending arrangement” and can be established by an employer for employees.

Are flexible spending accounts right for You?

There’s no one-size-fits-all approach when it comes to flexible spending accounts. To decide if an FSA is right for you, forecast upcoming health and dependent care expenses for the year, plus general drugstore-item spending, and become familiar with the FSA plans being offered.

What are the benefits of a flexible spending account?

One of the key benefits of a flexible spending account is that the funds contributed to the account are deducted from your earnings before taxes, lowering your taxable income. As a result, regular contributions to an FSA can reduce your annual tax liability. The IRS limits how much can be contributed to an FSA each year.