Why wouldn’t you use an FSA?

No, really, I’m asking, why on earth wouldn’t you use an FSA if you have access to one?  I don’t get it.  I love my FSA.

If you don’t know what I’m talking about, an FSA is a Flexible Spending Account, and this links to more info on it.  As a quick summary, it’s offered through some employers.  An employee puts aside a certain amount of money pre-tax.  This money can be spent on medical expenses.  Some offer a dependent care FSA, in which case the pre-tax dollars can be spent on dependent care.  There’s a catch, of course.  You decide at one point in the year how much money to set aside, and that gets taken out of each paycheck.  Whatever isn’t spent on medical needs/dependent care by the end of the year, you lose.  If you put aside $500 and you only spend $350, then you lose $150.  That’s a big catch, so you have to estimate very carefully.  But if you do have leftover at the end of the year, you can always use it to buy a new pair of glasses, or get an acupuncture treatment.  Still, you’re spending your money pre-tax, so that can add up to huge savings.

I started a new job last year, and it was the first time I had access to an FSA.  My main complaint about FSAs is that they are not offered to everyone.  I understand that the government depends on companies to handle the burden of managing these accounts, but it is incredibly unfair to offer this tax advantage to only a portion of the population.  Now, if you are lucky enough to be someone who does have access to an FSA, use it!

[Note: My other complaint is that the government added some crazy hurdles for nonprescription meds this year.  Now you need a doctor’s note to get reimbursed for cough drops or aspirin.  But that’s a rant for a different day.]

When I started my job last year, I asked co-workers about the process for getting reimbursements.  I was shocked by how many didn’t use it.  Yes, some people are healthy and don’t need it, but even if you’re on just one prescription, or need just one dental procedure, it’s worth it.  If you are reading this site, you likely spend more than that.  I use this money for medical visit copays, medical visit parking, prescriptions, vitamins, and random needs.  Last year I used it for physical therapy.  I use it for orthodics.  I used it to buy a new air conditioner this summer (because my health condition worsens in hot and humid weather, a/c is a medical necessity for me.)  I used it to buy new glasses, both distance and reading (yes, in my early 30s I need reading glasses.  I blame the many hours on the computer.)

So what does this mean?  I put aside $1000, and it looks like I could have put aside more.  I’ll remember that for next year.  But this year I put aside $1000, which means I’ll end up saving about $250 in taxes.  That’s huge!  That’s money that I’ve been spending every year, in addition to my health insurance premiums, and in addition to medical-type expenses that aren’t covered by the FSA (like the sneakers I buy because of my knee and back problems, but that aren’t technically a medical expense.)  What would you do with an extra $250?  Spend it on more medical stuff?  Save it?  Go to a fancy dinner?  Good, now go set up your FSA!

And if you don’t have access to an FSA, let’s brainstorm on how to get access to everyone.  It’s not right to offer this federal tax advantage to only some citizens.  It’s bad enough that health insurance is so often tied to your employer, but federal tax benefits shouldn’t be!  I know many healthy (and some not so healthy) people who think it is a waste of time to save receipts for an FSA.  For those of us who spend thousands and thousands of dollars every year on our healthcare, above and beyond premiums, those few minutes of effort can have huge payoffs.  Everyone deserves a shot at those payoffs.

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