| The
University's Flexible Spending Accounts add value and convenience to your health care and
dependent care expenditures. They also reduce
your tax bill. Here is an example of possible tax savings with an FSA.
|
Pre-Tax
(with an FSA) |
After Tax
(without an FSA) |
| Annual taxable income |
$35,000 |
$35,000 |
| Less Health Care FSA pre-tax contributions |
$2,000 |
0 |
| Adjusted taxable income |
$33,000 |
$35,000 |
| Less federal taxes |
$3,533 |
$3,895 |
| Less state taxes |
$1,138 |
$1,222 |
| Less FICA taxes (7.6%) |
$2,525 |
$2,678 |
| Less health care expenses paid after taxes |
0 |
$2,000 |
| Net income |
$25,804 |
$25,205 |
| Savings |
$599 |
0 |
Here's how FSAs work:
- Each year, you
decide the amount you will contribute to your health care and/or dependent care
flexible spending accounts. The amounts should cover your expected out-of-pocket health
and/or dependent care expenses for the year. Use the FSA online Calculator to help determine how much to contribute.
- The contribution
amount you elect will be divided into equal amounts--24 if you are paid bi-weekly
and 12 if you are paid monthly--and deducted from your paychecks. The deducted
amount will be deposited into the appropriate flexible spending account. That amount
will also be deducted from your taxable earnings and, therefore, not taxed.
- As you and your
eligible dependents incur eligible expenses, all you need to do is submit flexible
spending claims. Your claim will usually be paid within ten business days from
the date it is received by this plan's external claims processor, SHPS.
- You can claim
amounts equal to your entire annual health care contribution from your Health
Care Flexible Spending Account at any time during the year.
- To receive a reimbursement
from your Dependent Care Flexible Spending Account, you must have accumulated sufficient
contributions to cover the claim being made.
- You will not pay
taxes on the amounts you contribute to either account, and your annual taxable
income is reduced by the amount of your contribution.
- One cautionary
note: it is important to carefully - and accurately - predict your yearly out-of-pocket
expenditures. Any amounts contributed to your account for which a flexible spending
claim is not made by the deadline will be forfeited. In other words - use it or
lose it!
- You
can file claims for pretax reimbursement of 2007 expenses
through May 31, 2008, and for reimbursement of 2008 expenses
through May 31, 2009.
- Please read this
information carefully to make sure you understand the key features of this valuable
tax-saving program.
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