INELIGIBLE EXPENSES   What's not reimbursible under HEALTH CARE FSA: Insurance premiums Vitamins, herbal supplements Prescription drugs for cosmetic purposes Vision lens protection plans Tooth whitening or bonding Weight maintenance programs Cosmetic surgery that only improves appearance Payments to domestic help Toiletries or cosmetics Special foods Ineligible under DEPENDENT CARE FSA: Care for child over 13 Overnight camp School costs

HEALTH
25 Ways to Spend Your Flex Account
by Kimberly Lankford

If you've been healthy this year, congratulations. But if you've spent less on medical expenses than you expected when you set up your flexible spending account, you may be scrambling to find ways to use the money before it disappears.

Many companies let employees set aside $2,000 to $3,000 annually in pre-tax money to spend tax-free on medical expenses. It's a great deal, but the big catch is that you lose what you don't use by the end of the plan year.

The good news is that there are plenty of places you can spend the money -- much more than there had been in the past -- and if you start considering your options now, you should have plenty of time to make the necessary appointments and purchase the items and procedures you really need.

Where to spend your flex funds

You can use the flexible spending account money for almost any health-related expense that isn't covered by insurance, including:

1. Deductibles and co-payments
2. Dental work
3. Orthodontia
4. Eyeglasses
5. Contact lenses
6. Prescription sunglasses
7. Laser eye surgery
8. Psychotherapy, psychiatry, psychology
9. Drug and alcohol treatment
10. Smoking cessation programs and prescriptions
11. Medically necessary cosmetic surgery
12. Massage therapy to treat an injury
13. Physical therapy
14. Speech therapy
15. Out-of-pocket expenses for fertility treatments
16. Chiropractic care
17. Doctor-recommended weight-loss programs
18. Hearing aids and batteries
19. Medical equipment, such as wheelchairs, crutches or oxygen equipment
20. Assistance for the disabled, including guides, Braille books, seeing-eye or hearing-trained animals, note takers, etc.
21. Birth control pills, devices and procedures
22. Acupuncture or related procedures to treat a medical condition
23. Medically necessary prescriptions
24. Vaccinations
25. And now you can also use flex funds for medications that don't require a prescription, such as allergy and cold medications, antacids and pain relievers.

You can make appointments and purchases until the last day of your plan year. Most plans give you a grace period to submit claims for the previous year. Check with your plan administrator or human resources department for details and specifics on deadlines and claims processing.

You can still come out ahead

And while your goal should be to spend every nickel, don't feel too bad if you have to surrender some flex money. You might still come out ahead.

That's because the money you contribute lowers your taxable income, which ends up lowering your tax bill. For example, say your taxable income (income after deductions and exemptions) is $100,000. You decided to set aside $3,000 in your flex plan, but were only able to spend $2,500. You lost $500 right? Wrong.

You've actually saved $485. How? Because you left the IRS less money to tax. That $3,000 contribution lowered your taxable income to $97,000. If you pay 33% in federal, state and social security taxes, you only have to spend $2,015 of your flex money to break even. Because you've spent $2,500, you are actually ahead by $485.

Estimate your flexible spending account break-even point and see how much you're saving, or how much more you need to spend.

Take advantage of next year's contribution

And don't let sacrificing some flex plan money this year turn you off from making the most of your flexible-spending account next year.

Now is the time that many employees have to consider their health benefits options. And many employers are increasing their employees' share of the bill for health insurance co-payments, deductibles and out-of-pocket costs for prescription drugs -- all of which can be paid with pre-tax money from your flexible spending account.

Your employer may also offer a dependent-care flexible spending account, which lets you set aside up to $5,000 in pre-tax money for child-care expenses.

Lowering your taxable income by contributing to flexible spending accounts can also help you qualify for other tax breaks if you're close to the income limits -- helping you qualify for Roth IRAs, education, dependent child, and other tax credits.

Estimate out how much money to contribute to each type of account next year.