Flexible Spending Accounts (FSA)
Want an easy way to pay for health and dependent care expenses not covered elsewhere AND save taxes? The IRS allows you to set aside pretax money in an FSA to pay for health care and/or dependent care expenses. There are two types of FSAs:
Health Care FSA
You can contribute up to $2,600 per year of pretax dollars to pay for expenses not covered by your medical, dental and vision plans. Your full contribution amount is available Jan. 1 (or your first day of coverage). You’ll get a Visa debit card for your FSA, so there is no need to file claims! Remember to keep your receipts as you may be asked to validate expenses.
Dependent Care FSA
You can contribute up to $5,000 per year of pretax dollars to pay for dependent care expenses, such as daycare costs. (If you're married and file separate tax returns, the maximum amount you can contribute each year is $2,500.) Your contributions are deposited in your FSA each pay date. To utilize your account, you just submit a claim to be reimbursed. Note, you cannot contribute to or claim Dependent Care FSA expenses for services incurred while on Leave of Absence.
Few things about FSAs…
You get a double tax advantage with an FSA:
- Your contributions are deducted from your pay before taxes are taken out, lowering your taxable income
- You use tax-free money to pay for health care or dependent care expenses
You must use the money in your FSA accounts each year, otherwise you lose it. The only exception is for the Health Care FSA, where you can rollover $500 into the following year. Plan carefully to determine how much you want to put in. Need help? A Health Care FSA Estimator is available on Your Benefits Resources when you enroll.
The Childcare Subsidy gives you free money to help with your childcare bills. You must enroll each year in the Childcare Subsidy, but you are not required to contribute your own dollars to a Dependent Care account. If eligible, you’ll receive
- $200/month if your Annual Household Income is $63,000 or less
- $125/month if your Annual Household Income is between $63,000.01 and $99,000
Contributions are deposited into your Dependent Care FSA on the first day of each month. Should you choose to contribute additional money to your Dependent Care FSA, you’re limited to the same $5,000 yearly limit (including the funds deposited by T-Mobile as part of the Childcare Subsidy).
You will continue to receive Childcare Subsidy funding while on Leave of Absence. However, you cannot claim Childcare Subsidy expenses for services incurred during your Leave of Absence.
Tax Reporting: The Childcare Subsidy will be reported in box #10 on your W2 statement at the end of the year, even if you don’t spend it.