Advocate Health Care
Benefits
Flexible Spending Accounts

 
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Tax Advantages
Using FSAs is a tax-effective way for you to pay for health and dependent care expenses. When you use a Flexible Spending Account, money is taken from your pay (before taxes are calculated) and put into your flexible spending account. Since this reduces your taxable pay, you pay less in federal income and Social Security taxes and state and local income taxes. When you pay eligible health or dependent care expenses, you can then get reimbursed from your Flexible Spending Accounts with these tax-free dollars.

Here's an example to help you see the tax savings. Assume you're married, have two children, and both you and your spouse work. Your combined family income is $45,000 a year, and you file taxes jointly. You decide to contribute $1,000 to your Health Care FSA and $3,500 to your Dependent Day Care FSA.

  Using Flexible Spending Accounts NOT using Flexible Spending Accounts
Combined income
 $45,000 $45,000
Health care expenses
 ( 1,000) 0
Dependent day care expenses
 ( 3,500) 0
Taxable income
 40,500 45,000
Federal income and Social Security taxes
 ( 6,075) ( 6,750)
Take home pay
 34,425 38,250
Health care expenses
 0 ( 1,000)
Dependent day care expenses
 0 ( 3,500)
Spendable pay
 $34,425 $33,750
Tax savings
 $675