A Flexible Spending Account (FSA), is governed by IRC Section 125, allows employees to be reimbursed when they pay out-of-pocket for medical/dependent care expenses with pre-tax dollars.
Employee Savings Example
| Annual Flexible Spending Account Tax Savings-example * |
|
With the Plan |
Without the Plan |
| Annual Earnings |
|
$40,000 |
$40,000 |
| FSA Contribution |
- |
$2,500 |
|
| Taxable Income |
= |
$37,500 |
$40,000 |
| Estimated Federal & Social Security Taxes 24% |
|
$9,000 |
$9,600 |
| Adjusted Income |
= |
$28,500 |
$30,400 |
| Additional Medical & Dependent Care Expenses |
- |
|
$2,500 |
| Take Home Pay |
= |
$28,500 |
$27,900 |
| Total Employee Annual Tax Savings |
|
$600 Savings |
|
As an employee, you can save by using tax free dollars to help pay for medical/dependent care expenses