Thrifty Thinking: FSAs - A must-have for new and expecting moms

For more than 30 million Americans, December isn’t just the holiday season. It’s also the last chance to spend remaining 2019 flexible spending account (FSA) funds before they’re forfeited to the “use-it-or-lose-it” rule. Here’s what you need to know about FSA’s and how this tax-advantaged account is a wise financial choice for moms at all stages of the parenting journey.

An FSA primer
An FSA (also known as a general medical FSA) is an employer-sponsored benefit that you can contribute to on an annual basis. For 2020, you can set aside up to $2,750 from your paycheck tax free if you’re enrolled in an FSA. This amount is deducted from your paycheck in equal increments over the course of the year.

Enrolling in an FSA has two key benefits: it reduces your taxable income, and gives you access to tax-free funds you can use to pay for thousands of eligible products and medical services. But there’s one very important rule to be aware of: you have to spend these funds by the end of the plan year, or they’re forfeited back to your employer. Then the process starts all over again with the following plan year. For most people, the plan year is the same as the calendar year.

What makes a product or service FSA-eligible?
The Internal Revenue Service’s (IRS) definition of “medical care” determines what expenses can be paid for with an FSA. This list of expenses are called IRS 213(d) expenses. According to this designation, every FSA-eligible product or service must “diagnose, cure, mitigate, treat or prevent a disease.” To learn what an FSA can cover, this eligibility list is a great start.

How much can I save annually with an FSA?
A single individual who makes the median 2019 income ($63,030) who elected the full 2019 FSA contribution ($2,700), should realize about $880 in tax savings from using an FSA. A married couple can enroll in two FSAs and max out the contribution in each if they file a joint tax return.

Who is covered by my FSA?
An FSA can cover your spouse and tax-eligible dependents -- typically, adult children up to age 26 and adult dependents who are claimed as dependents on your tax return.

Is this the same as a dependent care FSA?
While your medical FSA can cover your dependents, a “dependent care FSA” is an entirely different account. A dependent care FSA can be used only for child care and adult dependent care, not medical expenses.

How can FSAs help growing families save money?
In addition to the yearly tax savings, setting aside FSA funds can cover a wide range of family essentials for kids of all ages. Here are a few of the baby and toddler expenses you can pay for with an FSA:
Prenatal vitamins
Breast pumps and accessories
Baby health products
Children’s and baby sunscreen
Baby health monitors
First-aid products
Thermometer
Nasal aspirators

Still have FSA funds to spend?First thing’s first, find out your deadline. Employers can elect some deadline extensions, but for many Americans, their plan year ends on December 31, which means time is running out to spend down your funds.

If you still have FSA funds to spend, don’t wait. FSAstore.com has you covered this deadline season with:

• The largest selection of 100% guaranteed FSA-eligible products
• The ability to use FSA debit card and skip the paper claims
• 24/7 access to trusted FSA experts via phone or online chat
• Fast and free shipping on orders over $50
• Accepts all deadline orders until midnight on December 31

About the authorSydney Myers is a merchandising specialist at Health-E Commerce, the parent company of FSAstore.com, HSAstore.com and WellDeservedHealth.com, a family of brands that serve the 60+ million consumers with pre-tax health and wellness accounts.