If you have a health plan through a job, you can use a Flexible Spending Account (FSA) to pay for copayments, deductibles, some drugs, and some other health care costs. Using an FSA can reduce your taxes.
A Flexible Spending Account (also known as a flexible spending arrangement) is a special account you put money into that you use to pay for certain out-of-pocket health care costs.
You don’t pay taxes on this money. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside.
Employers may make contributions to your FSA, but aren’t required to.
Learn about Flexible Spending Accounts
For details about your company’s FSA, including how to sign up, ask your employer.
You use your FSA by submitting a claim to the FSA (through your employer) with proof of the medical expense and a statement that it has not been covered by your plan. You will then receive reimbursement for your costs. Ask your employer about how to use your specific FSA.
Read more about how FSAs work in this IRS publication (PDF).
You generally must use the money in an FSA within the plan year. But your employer may offer one of 2 options:
Your employer can offer either one of these options but not both. It’s not required to offer either one.
At the end of the year or grace period, you lose any money left over in your FSA. So it's important to plan carefully and not put more money in your FSA than you think you'll spend within a year on things like copayments, coinsurance, drugs, and other allowed health care costs.
No. A similar product, called a Health Savings Account (HSA), allows you to set aside money on a pre-tax basis to pay some health expenses if you have a “high deductible” Marketplace health insurance plan.