Tax Benefits #

With an FSA, contributions are pre-tax

This means you do not pay federal income or payroll taxes on the money you put in. This saves you roughly 20% to 40% on each dollar (depending on your tax bracket) compared to paying out-of-pocket with after-tax money.

Withdrawals are tax-free as well, as long as they are for eligible expenses. In other words, an FSA effectively gives you a discount on medical or dependent care costs equal to the taxes you would have paid on that income. Example: if you put $2,000 into a health FSA and you’re in a 22% federal tax bracket, you save about $440 in taxes that year.