Flexible spending account limits are rules that govern the amount of money a person can contribute to this type of account. A flexible spending account allows an individual to deposit tax-free money into an account and use the money to pay for medical expenses that his health insurance will not cover. The regulations for these accounts also govern when this money must be used and what happens to money left behind in a given tax year. Usually, employers set maximum flexible spending account limits, but that is subject to change.
Many people use flexible spending accounts as a way to supplement health insurance that doesn’t fully meet their needs and save on taxes. The money a person chooses to contribute to this type of account is contributed before the taxpayer has taxes taken out of his paychecks. This lowers the account holder's taxable income and may translate into reduced tax liability. There are flexible spending account limits that govern how much a person can contribute in a tax year, however. Since limits are subject to change, a person may do well to check with his employer or a tax agency to learn the current limits.
In addition to flexible spending account limits that govern how much money a person can contribute, there are also regulations for how the money in this type of account can be used. Usually, the money can be used for unreimbursed medical, dental, and vision expenses as well as for mental health counseling fees. These accounts may also be used to pay for unreimbursed hospital fees and long-term health care, certain types of insurance payments, medications, and nursing care. An individual may also use flexible spending account money to cover acupuncture treatments, alcohol- or drug-abuse treatments, and non-elective cosmetic surgery. The funds may even help a person pay deductibles, handle family planning costs, and cover expenses for dentures, braces, and wheelchairs.
When learning about flexible spending account limits, a person may benefit from considering whether or not he will use all the money he deposits in a given year. While this type of account may allow a person to save money on taxes and set aside money to meet medical expenses for which he is not covered, it may sometimes result in a significant loss of funds. Unfortunately, the money in a flexible spending account does not roll over to the following year. Any amounts that an account holder does not spend in a given tax year are forfeited. For example, if an individual has $2,000 US dollars (USD) in a flexible spending account and only submits claims for $800 USD of it, he stands to lose $1,200 USD.
