Flexible Spending Accounts

Tax Savings with Flexible Spending Accounts

FSAs offer tax advantages by allowing you to set aside pre-tax dollars for eligible expenses. If you elect an FSA, you must re-enroll each year. Neither the election nor the account balance roll over year to year – you must Use It or Lose It.

FSA Options

Health Care Account

An FSA for health care can be used for medical, prescription drug, dental and vision expenses. 100% of your annual election is available on day 1 of the plan year, but you must use-it-or-lose-it. Any unused funds that you save are forfeited.

  • Contribution Range: $60 – $3,300 per year
  • Eligible Expenses: Medical, prescription drugs, dental and vision expenses that are not covered by insurance, as well as smoking cessation aids and other programs your primary health care provider may recommend, but that are not prescription items
  • Automatic Processing: Expenses not covered by your medical plan automatically roll to FSA (if you have one); you also receive a debit card to pay for eligible prescription drug expenses at the point of sale
  • Reimbursement: Up to annual contribution amount

Dependent Care Account

An FSA for dependent daycare expenses can be used for child- and eldercare expenses during the plan year. You forfeit any unused funds that you saved.

  • Contribution Range: $500 – $7,500 per year ($3,750 if married filing separately)
  • Eligible Expenses: Care for children under age 13 and/or dependents with disabilities
  • Minimum Claim: $25
  • Processing: Bi-weekly claim processing

Important Dependent Care Account Information

You’ll be reimbursed for the cost of kindergarten only if the following requirements are met:

  • Your child is in a grade level below first grade;
  • The primary purpose is for custodial care and not for education; and
  • The amount you pay for kindergarten is part of and cannot be separated from the cost of dependent care.

For example: Your five-year-old child attends kindergarten in the morning and an after-school day care program at the same school. Your total cost is $3,000, $1,800 of which is for the after-school program. Only the $1,800 qualifies for reimbursement.

Important FSA Considerations

  • Separate Accounts: Cannot move money between Health Care and Dependent Care accounts
  • No Double-Dipping: Cannot claim expenses on taxes if reimbursed through FSA
  • Annual Re-enrollment: Must re-enroll each year
  • Use It or Lose It: Unused funds are forfeited (except for approved carryover amounts)

FSA vs. Tax Credit for Dependent Care

Compare the Dependent Care FSA with the federal tax credit to determine which is more beneficial for your situation. The IRS allows up to $3,000 (one child) or $6,000 (two or more children) in eligible expenses for the tax credit.

Please note that Givaudan is not offering you tax advice about the Dependent Care Account versus the federal tax credit. We recommend that you contact your personal tax advisor or accountant to determine which alternative best suits your situation.