Adjust Text Size

Flexible Spending Account Tapped out for 2005

Written by Nickel - 2 Comments

Last fall I opted to set aside $3,600 in my flexible spending account for 2005 — I knew that we’d be spending a good chunk of change on medical expenses this year, so I figured we might as well save a bit off our taxes. Well, four wisdom teeth and a shiny set of man-braces later, and we’ve already recouped the entire amount. Actually, if I wasn’t lazy about faxing in my claim for the last few hundred bucks, I would’ve cashed it out entirely a couple of months ago. Anyway, depending on where we end up tax-wise this year, this represents a total federal tax savings of at least $540. I say ‘at least’ because, as I’ve noted previously, I’ve decided to redistribute my retirement contributions such that I’ll be able to capture my full 403(b) match while at the same time funding a Roth IRA. But I still haven’t worked out what effect this will ultimately have on our tax bracket. We do very well in terms of exemptions and deductions (lots’o'kids, mortgage, retirement contributions, charitable donations, etc.) so my best guess is that we’ll still be able to keep ourselves in the 15% tax bracket when all is said and done. If not, our tax savings will be even greater.

Published on July 13th, 2005 - 2 Comments
Filed under: Taxes

About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

2 Responses to “Flexible Spending Account Tapped out for 2005”

1
OL Says:
July 21st, 2005 at 12:22 am
How did you come up with your $3600 figure? With the “use it or lose it” provision you have to be pretty sure that you will incur the expenses. I had read somewhere that there is talk of removing the “use it or lose it” provision. Anyone have a link?

–OL
2
nickel Says:
July 22nd, 2005 at 9:50 am
$3,600 was the limit for 2005. I actually knew that we’d be incurring more than that in eligiible expenses, so I would’ve loved to set aside more.

Not sure about the removal of the use-it-or-lose-it angle. I’ve always thought that a good compromise would be to allow you to carry it over from one year to the next, but to reduce the available contributions in the following year — say the limit is $3,600 but you have $500 left over from last year… Then you would only be able to stash an additional $3,100. This would be difficult to implement, though, as you typically decide how much to commit for the upcoming year in November (at least this is how at works with my employer), but expenses incurred through December 31 count against the current year. Thus, there’s a couple of months in which you may not be entirely sure how much will be left, or if you’ll go over the limit for the next year. However, they could just penalize you and refund excess contributions if, after the dust settles, you are overcommitted. I think that, if properly implemented, this would work well and would be much more fair than what is currently in place.

Top Cards by Category

CASH BACK CREDIT CARD (see all)

Chase Freedom^® Visa - $200 Bonus Cash Back

Earn $200 Bonus Cash Back after you make $500 in purchases in your first 3 months. 5% Cash Back on up to $1,500 spent in bonus categories each quarter.

AIRLINE MILES / REWARDS POINTS CREDIT CARD (see all)

Platinum Card^® from American Express

Earn 25,000 Membership Rewards(R) bonus points when you spend $1,000 in your first three months of Card membership.

CREDIT CARD DEALS (see all)

American Express^® Green Card - Introductory Annual Fee of $0 for the First Year!

Receive 10,000 Membership Rewards bonus points when you spend $500 in your first three months of card membership. Redeem bonus points for gift cards valued at $100. This is a charge card with no pre-set spending limit.

BALANCE TRANSFER CREDIT CARD (see all)

Discover^® More^® Card

Earn up to 5% cash back* in categories that change and enjoy a 0% introductory rate for 15 months on Balance Transfers and 15 months on Purchases.

LOW INTRODUCTORY RATE CREDIT CARD (see all)

Discover^® More Card - $0 Balance Transfer Fee!

Enjoy no balance transfer fee for a limited time. 0% introductory rate on Balance Transfers and Purchases. Earn up to 5% Cashback Bonus in categories that change like gas, restaurants, department stores and more. Limitations apply*

LOW INTEREST RATE CREDIT CARD (see all)

Discover^® More Card - $0 Balance Transfer Fee!

BUSINESS CREDIT CARD (see all)

The Business Platinum Card^® from American Express OPEN

Enjoy amenities for you and your business, like: complimentary airport club access, including American Airlines Admirals Club(R) lounges.

STUDENT CREDIT CARD (see all)

Discover^® Student Clear Card

5% Cashback Bonus in categories that change like gas, restaurants, department stores and more. Limitations apply*. Up to 1% unlimited Cashback Bonus on everything else. No annual fee

GAS REBATE CREDIT CARD (see all)