Flexible Spending Account - FSA

An FSA, or flexible spending account, is a tax-advantaged bank account used for a special purpose. Similar to a health savings account (HSA). An FSA is something your employer might include as a benefits package option.

Before the Patient Protection and Affordable Care Act, a major con of flexible spending accounts was that any money not used by the end of the year went to the employer...i.e., it was a use-it-or-lose-it situation. Under the Affordable Care Act though, FSAs now allow employees to carry up to $500 from one year to the next.

Health FSAs can be used for paying deductibles and copayments on medical and dental expenses. Dependent care FSAs are also common; they put money aside for caretakers to care for dependents that they’re responsible for: kids, the elderly, or those with physical and/or mental limitations.