For Employees Considering Opening A Flexible Spending Account

//For Employees Considering Opening A Flexible Spending Account

Many people wonder if joining the company Cafeteria Flexible Spending Plan makes financial sense. Here we provide you with some tools to help you make that decision. A Flexible Spending Account is a great way to save taxes on expenses you already have or reasonably expect to incur within the next 12 month period. You save this money on each paycheck, and increase your take-home pay. Because of this it’s like giving yourself a raise!

What is pre-tax?

So what exactly does it mean to save money by using Pre-Tax dollars? Consider a paycheck of $1000 dollars and an eligible expense of $400. When you use pre-tax dollars for your eligible expenses, the money comes out of your paycheck before the government taxes your wages.

Without a Flex Plan
$1000 Paycheck
$ 250 25% taxes
$400 Expense
$350 Take Home Pay
With a Flex Plan
$1000 Paycheck
$ 400 Expense
$600 Taxable Income
$150 25% taxes
$450 Take Home Pay

In the above example, you can see that by running the expense through the cafeteria plan, the person ends up with $100 extra dollars to take home after expenses. This is because instead of the government taxing the entire $1000 paycheck, they only taxed the portion of the paycheck not used to pay for eligible expenses.

So now it is important to determine what kinds of expenses are eligible, so you know which kinds of expenses that you have already qualify under the plan. Please click here to view the Sample List of Permitted Expenses

Here are a few more informational sheets you may find helpful when considering if opening a FSA account will help you save money:

Information on Dependent Daycare Accounts

Will I really Save Money When I Join?

Worksheet To Help Calculate Your Election

Online FSA Calculator

For a full overview on how the Flex or POP plans work with us – click here