Comments

  1. Anonymous says

    Can you use the pre-tax $ in your flex spending account to pay the employee share of a health insurance plan??? AJ

  2. Harry Sit says

    AJ,

    No, money in health care flexible spending account cannot be used to pay health insurance premium. If your company sets up a section 125 cafeteria plan, the deduction for the health insurance premium should be already pre-tax.

  3. sewall says

    Two points. Most people are eligible for the child and dependent care tax credit, based on spending up to $3k of services. This is not as good a deal as the $5k you get in an FSA. It isn’t even likely to be as good as a $3k FSA because of the avoidance of Social Security and Medicare tax with an FSA. (Getting into this is a bit complicated.) But, if you only spend $3k and you forget to set up or don’t want to be bothered with an FSA (not that it is hard), you still get some benefit when you do your taxes.

    Second point. There is a loophole with the child-care FSA (and maybe the health-care one too–I don’t know about that one). If you set it up and use the money and later find out you weren’t eligible, due to income limitations, then it just gets sorted out on your tax return. No penalty. But you still have gained! Your tax return only figures the income tax you should have paid, not the SS and Medicare tax. So, you still save on the SS and Medicare tax even if you weren’t eligible. Amazing! This is why I always set one up even if I am not sure of our eligibility. (We don’t know my wife’s self-employment income until the end of the year so I can’t know in advance if we qualify.)

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