Money Saving Opportunity Ahead: Open Enrollment.
Making more of the money you have is the best way to give yourself a pay raise without asking for it from someone else. While there are many ways to do this, some are right in plain sight. Spending less and getting more is the obvious choice for savings and when you can quantify that in actual cash, it’s even better. Let’s consider the reducing our taxable income by signing up for the FSA tax advantage, Flex Spending Accounts and Health Care Spending Accounts. Now is the time to consider it because during this time of year most employers are having employees sign up for next year’s benefits, known as “open enrollment”. During this period you can select via FSA elections to have up to $2500.00 set aside from your pay for specific Healthcare and up to $5000.00 for dependent care related expenses. This set aside is before tax thus reducing your taxable income by the amount you choose, up to the limit.
Although either limit may be a lot to consider setting aside for the year, you can choose any amount up to the limit and typically it is taken out in equal amounts per paycheck through the year. The amount deducted may fluctuate as you make claims for reimbursements and so on. So, can you afford to pay unnecessary taxes? That’s the real question. You can boost your income by up to $2250.00 in savings on taxes should you go to the max on both. That would be a pay raise with no more responsibility other than being more diligent with your money.
In this podcast I discuss some of the benefits and details, however, some FSA providers lay it out in very plain terms. Check out Aetna FSA breakdown and explanation for a breakdown, and check out both the dependent care link as well as healthcare link. Although you may have another provider, the tax benefit works the same regardless of the provider or employer facilitating it. To get a good idea of the costs and expenses covered for healthcare and OTC, (over the counter) items check out https://fsastore.com/ they offer details on all eligible items that you can buy with tax free monies, you may find some surprises here. Here’s the link to the official tax document detailing the rules and guidelines Tax rules and details Why pay the tax on the income and then the tax on the goods too! It’s all about the incremental things we do to make and manage our wealth. This is a great tax benefit that I have used for years in a lot of creative ways, all legal of course!