Thursday, February 15, 2007

Flexible Speding Account (FSA) Savings Greater Than Most People Realize

Check out the article from which highlights, among other things, just how great the savings are from using an FSA account. Most people think that the savings are just from federal income tax, but keep in mind that you also save 7.65% social security tax and 5% or more of state income tax. From the Kiplinger article (see quote below) you can see their calculation of $1,100 in tax savings from just $3,000 in payroll deductions. It is a great deal, but you do have to make certain that you expense all of the contributed funds.

"You can save big by paying for your out-of-pocket health care costs with pre-tax dollars in an FSA. Salary that goes into these reimbursement plans dodges federal income and Social Security taxes, and in most states, state income taxes, too. For example, put $3,000 in an FSA to pay health care bills that you have to pay anyway and you would save more than $1,100 in taxes (assuming a 25% federal brackets, 5% state bracket and 7.65% Social Security tax."

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