Year End Tax Planning: Flexible Spending Accounts

BOSTON (WBZ-AM) -- No one wants to talk about taxes a month before the holidays except probably me. But I do know there is still time to do some year-end tax planning.

If you are willing to spend some time, I can guarantee you some savings when you file your taxes next year.

We'll start with the Flexible Spending Accounts (FSAs), sometimes called cafeteria plans or section 125 plans. This is a benefit offered by many employers whereby you set aside part of your income pre-tax to these accounts to use for medical or childcare expenses.

The maximum contribution this year for medical was $2,600 for medical expenses. Next year the amount increases to $2,650. An employer can choose not to raise the limit.

Also, the enrollment periods depend on the individual employer. Many do make it year-end but for Massachusetts state employees the enrollment period is April 5 thru May 3rd of 2018.

Currently you will lose any money remaining in your account at the end of the plan year, but depending on your plan, you may have a grace period of up to 2½ extra months to use the money in your account.

Also, your employer can now allow you to use up to $500 left in the healthcare account to be used towards next year.

There are some things you can do right now to use some of the dollars in your account:

  • Schedule your annual checkup if it is not covered by your health insurance plan
  • Pre-pay the kid’s orthodontist
  • Get your teeth cleaned, get the kids to the dentist over school vacation as well
  • Pre-pay your dentist if you are having dental work such as implants or crowns
  • Get an eye exam, an extra pair of glasses or prescription sunglasses
  • Weight loss programs – here you need a note from your doctor that you need to lose weight to treat a specific medical problem such as diabetes or high blood pressure, pre-pay the membership fees
  • Want to quit smoking – same route, get a doctor’s note and pre-pay the program fees
  • Keep track of your mileage to and from your health care provider
  • Schedule elective surgeries such as Lasik which is normally not covered by insurance
  • OTC drugs are not on the eligibility list but medical supplies are. Check your plan.

You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m. and 3:55 p.m.

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