Flexible Spending Accounts (FSA’s) are offered by many employers in the United States. The benefits of a flexible spending account (FSA) is that it allows you to use pre-tax money to pay for qualified medical expenses. What is the benefit of that you ask? For simplicity’s sake, let’s assume that you make $1,000 per month and that your tax bracket is 25%, and you have $100 put into your FSA, now you’re only taxed on $900, or $225, meaning that you take home $675. At the end of the year, you’ll have $1,200 in your Flexible Spending Account which you can use for any qualified medical expenses. Now assume the same situiation, however, you don’t have an FSA setup. Each month, you earn $1,000, but you don’t contribute anything to an FSA, so you are taxed 25% and you only take home $750. At the end of the year, you have no money in an FSA account, and you only have an extra $900 (assuming you saved that money). Let’s say that you have an emergency procedure performed that costs $1,100 – In scenerio 1, you’ll be able to pay for the procedure from the Flexible Spending Account, however in option 2, you’ll be left to pay the bill on your own, with your post tax dollars.

Flexible Spending Accounts are great because they give your money more power since you aren’t paying taxes on the money that is contributed.