what is flexible spending account

A flexible spending account (FSA), also known as a flexible spending arrangement, is a tax-advantaged financial account in the United States that allows individuals to set aside a portion of their earnings before tax to pay for qualified medical and dental expenses. The funds contributed to an FSA are not subject to income tax, which can lower the account holders taxable income. Qualified expenses include deductibles, copayments, prescription drugs, insulin, medical devices, and other out-of-pocket medical costs. Employers may also make contributions to employees FSAs, although they are not required to do so. Its important to note that the money in an FSA must generally be used by the end of the plan year, but employers can offer a grace period of up to 2 1/2 months, through March 15 of the following year, or allow a carryover of up to $500 to the next plan year.