FSA: Legally Pay Less Taxes
Reduce Your Tax Bill (legally)
The flexible spending account has to be done through your employer. In 2023, you can have $3,050 deducted from your paycheck ($2,850 for 2022) to be used for out-of-pocket healthcare costs. This money is usually deducted monthly which is approximately $255. Since FSA money has the same pretax magic as 401K money, you get $255 for healthcare expenses but the deduction to your paycheck is approximately $178.50, essentially giving you a free $76.50 each month or $918 for the year. For these calculations, I assume a 30% tax rate; your actual numbers may vary slightly.
Your FSA contribution also reduces your tax bill at the end of the year since this contribution is pulled out pre-tax. If you get paid $50,000 per year and are putting $3,050 into a Flexible Spending Account, you will be taxed on $46.950 instead.
Your FSA money gets put into an account by your employer. Then you have to submit a reimbursement request with a receipt for your out-of-pocket healthcare cost. Most drug stores will put FSA eligible next to the items you purchase that qualify. Check out this list for all eligible FSA expenses.
Here are the ways my family has maximized our FSA account.
Dental expenses. In 2022, I had to get a crown and 2 fillings. I used FSA money for the amount not covered by insurance.
Over the counter PCR COVID tests.
Copays for the doctor and prescriptions
Nourish Osteo (see full story below)
You may not need to full $3,050. You can decide how much to contribute to a FSA account with $3,050 being the max for 2023. If you do not use all of the money by the end of the calendar year, the unused FSA money stays in your account to be used the following year. It does take a few minutes to submit reimbursements and you have to save your receipts but the tax free money is worth it.
Dependent Care FSA
If you have a child in daycare, preschool, after school care or day camps, you need to be using Dependent Care FSA. The maximum contribution is $5,000 per year per family. This account works the same way as FSA but is for childcare costs. The money is pulled out pretax and you have to submit a receipt to get reimbursed.
Most of our FSA money goes to Nourish Osteo
My daughter Bailey was born in July 2018. 3 weeks after her birth I could not walk and had shooting pain through my hip, leg and back. I went to the ER twice plus numerous doctor´s visits and they said they couldn´t find anything and that I was fine. I was desperate and in so much pain. Growing up my mom worked for the California Osteopaths and took me to see one when I was in college for my sciatica. So I did a quick google search for an osteopath and found Kylie Walsh. I went to see her and in one treatment she relieved my pain and gave me back 90% of my mobility. In just one treatment!!!! I was forever sold and indebted to Kylie. Since then, I see her every 6 weeks to keep my body pain free. Since this treatment is not covered by insurance, I use our FSA money.
Now Bailey sees Kylie or one of her practitioners every month as well. In December 2019, Bailey was hospitalized for RSV and on oxygen support for 1 week. She was only 1.5 years old and it was a terrifying experience. Since then she has been treated for pneumonia and after testing positive for COVID in May 2022 developed a horrible cough and breathing problems. Her doctor gave her two inhalers and said she would probably need them for the rest of her life. I don´t know why it took me so long to take Bailey to see Kylie but after a month of intense struggle with Bailey´s health and breathing, I booked her an appointment. After one treatment, her cough was gone! I cannot fully describe the amount of relief I felt. So now Bailey goes to Nourish Osteo once a month. They are also working on her jaw which has serious issues from sucking her thumb.
Kylie and her practice has been a complete game changer for me and my family. Now every time we get sick, we see her or someone in her practice within the first few days which is in addition to our regular appointments. I am so grateful that we can use our FSA money to pay for this life changing care. I know our quality of life would be significantly decreased if it wasn´t for Kyle and her practice. Thank you Kylie! I will always be eternally grateful for you and your work.
Kylie has offices in Albany, CA and Oakland, CA. If you are interested in seeing her or someone on her team, please check out her website.
Disclaimer: I am an educator, not your personal financial advisor. Please make sure to do your own research before moving forward with any actions discussed in this newsletter.
Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. Past performance does not guarantee future performance. Always remember to make smart decisions and do your own research!