If you contribute to a Flexible Spending Account (FSA) to cover your out-of-pocket medical expenses, it's time to review your remaining balance. Even if your employer extends the spending deadline to March of next year, you'll want to take full advantage of this tax-favored program.
One study found that over 80% of companies having 500 or more employees offered FSA plans, and they're popular with many smaller businesses as well. A huge selling point is the ability to reduce income taxes. In effect, by contributing pre-tax dollars to an FSA account, you enjoy a discount on costs you would incur anyway. But if you fail to spend the entire account balance before the deadline arrives, you forfeit whatever's left. That's the law.
Check with your human resources department or benefits office to confirm your company's FSA spending deadline (usually December 31 or March 15 of the following year). Then consider paying down your account balance with the following eligible medical expenses:
- Dental checkups. If you've already scheduled an appointment for a few months from now, consider moving it up. You also may want to pay for recommended dental procedures — crowns, fillings, and so on — before the spending deadline.
- Vision examinations. Many insurance providers offer limited coverage for visits to an optometrist or ophthalmologist, so consider setting up an appointment before the FSA deadline. If you need to renew your eyeglass prescription, now may be a good time to make that purchase as well.
- Chiropractic visits. Your insurance provider may limit the number of covered visits to the local chiropractor. Again, schedule additional appointments before the FSA deadline.
- Medications. Prescription drugs are generally covered, but if you use over-the-counter medications, you'll need a doctor's prescription or letter of medical necessity for those costs to be FSA-eligible.
- Mileage. Don't forget the cost of getting to and from medical appointments or drug stores. Keep track of the miles, the offices you visit, and the receipts. You're allowed to claim those miles using IRS mileage rates, but make sure you don't claim the same miles on your end-of-year tax forms.
- Medical supplies. Anything from first-aid kits to walking canes to blood pressure monitors may be eligible. The key is having a doctor-signed letter of medical necessity on file.