A flexible spending account (FSA) is an employer-sponsored fund where you deposit pre-tax dollars to use on qualified medical and healthcare-related expenses that insurance doesn't usually cover. It's similar to a health savings account (HSA), but there are key differences between the two, one of which is that FSAs have an annual deadline. If you don't spend what's in your balance in time, you lose that cash.
This year, the deadline to spend FSA money is December 31, 2021. Some employers do offer a grace period, usually up to 2.5 months after the deadline, to use the remaining balance. However, as CNBC explains, recent legislative changes brought on by the coronavirus pandemic have changed the way FSAs typically operate.
Before the pandemic, depending on your employer, you could roll over up to $550 to use the following year. But as of November 10, 2021, the Internal Revenue Service (IRS) increased the maximum carryover amount to $570 [PDF]. You may even be eligible to carry over all of your unused balance from 2021 into 2022 (this is also true for dependent care FSAs), if your employer opted into the new guidelines. The IRS also announced that it was increasing annual contribution limits for FSAs to $2850 for 2022, up from $2750 in previous years.
Though FSAs are for qualified medical and healthcare expenses, that money doesn’t always have to go toward doctor visits. You can use your funds to buy everything from sunglasses to first aid kits at sites like FSAStore.com, Heath Products for You, and Amazon, which has a whole section dedicated to FSA- and HSA-eligible products.
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