A health care, limited expense or dependent care Flexible Speding Account (FSA) helps you budget for expenses you’ll have this year while reducing taxable income.
A Flexible Spending Accounts is an employee benefits program designed to take advantage of Section 125 of the Internal Revenue Code. This allows employees to pay for qualified services on a pre-tax basis, thereby reducing their total taxable income and increasing their spendable/take-home income. Funds set aside in Flexible Spending Accounts are not subject to federal, state, or Social Security taxes.
In an FSA, employees may set aside on a pre-tax basis a pre-established amount of money per plan year. The employee can use the funds in the FSA to pay for eligible medical, dependent care, or transportation expenses.