Since medical expenses are always going up, you can never be too sure how much to spend. You cannot be too prepared for any medical costs that might arise. Even when you have comprehensive health insurance, you may be liable for some out-of-pocket expenses. This cost can vary from one year to the next. Sometimes you want to be prepared for the eventuality. A flexible healthcare spending account can help. There are three types of flexible spending accounts, namely limited expense, dependent care, and a flexible healthcare account. The difference between one and another is the level of coverage. Is the account worth it? Here are the reasons to have one.
Medical expenses are usually not taxed. If you designate the amount for medical purposes, you will not have to pay taxes for them. You will take the money before paying your taxes, thereby reducing your total tax bill. In the process, you will save significantly. The employer usually deducts the expenses before making any other deductions to make sure that the amount is secure for you to use.
Every time you save on taxes on any other item that reduces the number of deductibles from your salary, you end up with an increased take-home amount. If you pay out of pocket expenses from your take-home amount, you will end up paying taxes for the amount. Experts at GroupEnroll.ca calculate that an average person earning an average Canadian national wage rate of $52,000 loses over $600 if they don’t have a flexible spending account for their healthcare needs. The figure goes higher with your out-of-pocket expenditure for health. Those who have a spending account pocket this amount in their take-home salary. The difference between those who have and those who don’t is at least $1200, which is significant.
Everyone is trying to make savings in life. The quest for saving hacks is an industry in itself. When it comes to medical savings, a flexible healthcare spending account will always come up as a quick hack. Your health insurance will be sufficient when it comes to common healthcare bills. However, you will encounter some costs along the way. Medical expenses that are not often covered are preventive care, some optional vaccinations, and over-the-counter prescriptions. The card works for you if you are going for unscheduled checkups and elective procedures that insurance will not pay. Coinsurance, co-payment agreements, and other payments fall under this category. A flexible account can be used to pay for all these expenses.
The money from flexible payment accounts is always available whenever you need it. You do not need to fill in elaborate paperwork to seek approval to use it for medical payments. Though you contribute every month from your employer, the amount that you have indicated to contribute within the year will be available to use at any time. You can request checks based on the emergent expenses within the year, including the full amount.
You Set the Amount
The total pledged amount usually has a limit attached to it. You cannot contribute more than what the authorities deem as eligible for healthcare spending. The amount increases over the years, as the cost of healthcare continues to grow. You can pledge to contribute the full allowable amount. Once you have promised, the employer will deduct the amount from your wages.
You Can Use a Debit Card.
You don’t need to request checks from your account holder to pay. You can link the account with your debit card to pay easily and conveniently. This feature makes the whole experience of having this account much better.
The Can Rollover the Amount
Although the amount used will often be used within the year, some holders will allow you to roll over some of the money to the following year. Some will offer you a grace period of several months after the expiry of one year. Different accounts will provide varying levels of grace period and extensions.
As you have noted above, the healthcare spending account is different from the normal insurance cover and additives. It provides you with a leeway to pay for those expenses that you would naturally struggle to pay. It helps you do so while at the same time giving you incentives. The deducted money will help you pay less to the taxman, pay your healthcare costs conveniently, and increase your average take-home salary. Other features of an FSA account, such as debit card access and rollover options, can spice up the overall experience. This account is worth having.