How An FSA Can Save You Money

Posted by | · · | financial planning · personal finance

Looking for a way to save 20-40% on your out of pocket healthcare costs? If your employer offers a flexible spending account (FSA) then you may be in luck.


What’s an FSA?

An FSA allows you to pay certain healthcare expenses with pre-tax dollars. The end result being that you won’t pay taxes on these earnings. So if you’re in the 28% federal income tax bracket, subject to FICA taxes (7.65%), and live in MA (5.1% income tax) then you could effectively be saving up to 40.75% on your medical bills paid through an FSA! 


For more information on what medical expenses qualify (and do not qualify) under an FSA, check out Publication 502.


So what’s the catch?

There are three – first, you can only spend the money on qualified medical expenses (for example, you can’t use it to pay health insurance premiums); second, only $500 can be carried into the next year (in other words, this is a use-it-or-lose-it type of plan), and there are various limitations like when you can enroll and how much you can contribute each year (currently $2,600).


With all that being said, if your employer offers an FSA and you have a pretty good idea of how much you pay in medical bills each year, then an FSA may be right for you.


Interested in learning more about personal finance? Check out our other wealth management articles at, or contact Perennial Trust at (781) 202-6368 or email

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