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Health Care Flexible Spending Account
A Health Care Flexible Spending Account (Heath Care FSA) is a special account set up in your name by your company. You deposit before-tax dollars from your paycheck into these accounts, and then use the money to reimburse yourself for eligible medical expenses (such as your deductible, your coinsurance or copayments, or certain items not eligible for reimbursement under your medical, dental or vision plan).
Health Care FSAs can vary significantly from one plan to the next so be sure to check with your employer about specifics related to your plan.
How a Health Care Flexible Spending Account Works
Generally each year, you can elect to contribute a portion of your pay to the Health Care FSA with before-tax dollars. Then, when you have eligible expenses, you submit proof of those expenses and they are reimbursed from your Health Care FSA with dollars that have never been taxed. So, by setting aside money in the Health Care FSA, the cost of your health care is reduced.
You save money since you don't pay taxes on the before-tax contributions to the Health Care FSA, and you don't pay taxes on the money you receive in reimbursement. There is a helpful document available on IRS.gov (Publication 969) that can help answer questions related to the impact on income taxes.
Here's an example of the potential tax savings:
| Household income | $80,000 | $80,000 | ||
| Before-tax contributions to the account | - $2,000 | - $0 | ||
| Taxable earnings | $78,000 | $80,000 | ||
| Estimated taxes* | - $19,500 | - $20,000 | ||
| Earnings after taxes | $58,500 | $60,000 | ||
| After-tax payment of expenses | - $0 | - $2,000 | ||
| Take home pay | $58,500 | $58,000 | ||
| Your tax savings | $500 | $0 | ||
*Taxes assumed flat at 25%
Using this example, $2,000 worth of expenses will only cost you $1,500 (after deducting the tax savings from your before-tax contribution). Depending on your tax bracket and the amount you decide to contribute, the savings can be quite substantial!
Throughout the year, you can request reimbursement from your Health Care FSA for eligible medical, dental and vision care expenses (as defined by the IRS and/or your plan) that are not paid by your Medical, Dental or Vision Plans. The expenses eligible for reimbursement through your Health Care FSA are generally defined by your Health Care FSA administrator; these can vary significantly depending on the terms of your plan. Payment of claims is generally based on the rules set out in applicable regulations, your employer's plan design and on the information in the required substantiation documentation.
The following list represents expenses that are frequently submitted for reimbursement under Health Care FSAs. This list is not intended to be a complete list and should be used as a general guide. See below for more information.
This list contains several expenses for services offered at Atlanta Wellness Studio.
Alternative healers
For treatment by professionals for specific medical condition
Massage therapy
For treatment of a medical condition (consult with a primary care physician); NOT eligible when used for general well-being, relaxation, etc.
Massage chair - Expenses paid for a massage chair to treat a medical condition are reimbursable. Physician's diagnosis letter required.
Over-the counter items
Examples of generally eligible items used for medical care:
- Cold/hot packs
- Pain relievers
- Muscle soreness cream
Hypnotherapy - Expenses paid for hypnotherapy are reimbursable when prescribed by a physician as therapy to treat a medical condition. Physician's diagnosis letter required.
Scar treatments - Expenses incurred for the treatment of scars are reimbursable.
Smoking cessation drugs and programs - The cost of drugs to stop smoking for the improvement of general health are reimbursable. This includes nicotine patches and gum.
Smoking program - The cost of a program to stop smoking for the improvement of general health is reimbursable.
Spa or resort - Although a visit to a spa or resort may be prescribed by a physician for medical treatment, only the costs of the medical services provided are reimbursable, not the cost of transportation.
Weight loss programs, treatments and prescriptions - The cost of weight loss programs, treatments and prescriptions for general health are not reimbursable even if a doctor prescribes them. However, if the program, treatment or prescription is prescribed by a physician to treat a medical illness (e.g., heart disease), the expense should be reimbursable. Physician's diagnosis letter required.
*For more information regarding health spending accounts, please reference your health insurance company's website.