Sometimes called flexible spending arrangements, flexible spending accounts (FSAs) are an arrangement through your employer that lets you pay for many out-of-pocket medical expenses like copayments, deductibles and some prescriptions, with tax-free dollars.
You decide how much to put in an FSA, up to a limit set by your employer. You aren't taxed on this money.
If money is left at the end of the year, the employer can offer one of two options (not both):
- You get 2.5 more months to spend the leftover money.
- You can carry over up to $640 to spend the next plan year.