Cost Savings

An individual earns $45,000 annually and elects to contribute $2,850 annually to a Healthcare FSA to cover out-of-pocket medical costs.

YOUR ESTIMATED FSA COST SAVINGS EXAMPLE

Without FSA With FSA
Gross Earnings $45,000 $45,000
FSA Contributions -$0.00 $2,850
Adjusted Gross Pay = $45,000 $42,150
FICA, Fed/State Taxes -$6,750 $6,322.50
Out-of-Pocket Medical Expenses -$2,700 $2,700 (covered by FSA)
Total Take Home $35,600 $33,127.50

TOTAL SAVINGS WITH THE FSA: $427.50

Who Is Eligible

Employee Eligibility

In general, an individual must simply be employed by an employer who offers one and be otherwise eligible for benefits. Note: Even if the eligible employee chooses not to enroll in their company’s health insurance (for example, if an employee chooses to be on their spouse’s insurance plan instead) they can still sign up for the FSA. Owners of the company can participate in the FSA solely on their tax filing status. Below is a summary of those rules.

  1. C-Corporation Owners – May participate in an FSA and receive reimbursements tax free. C-Corp owners may use their FSA to reimburse their medical expenses, as well as those of their spouse and dependent.
  2. Sole Proprietors – Cannot receive reimbursements tax-free. However, if the sole proprietor is married, and their spouse is a W-2 employee, then the spouse can receive the tax-free benefit. In this case, the FSA is set up in the spouse’s name and the sole-proprietor is listed as a dependent.
  3. Partners – Cannot receive reimbursements tax-free. However, if the partner is married, and their spouse is a W-2 employee (but not a partner), then the spouse can receive the benefit tax-free. In this case, the FSA is set up in the spouse’s name and the partner is listed as a dependent
  4. S-Corporation Owners – That own >2% of the company’s shares and their spouse, parents, children, and grandchildren, cannot receive reimbursements tax-free (reimbursements are subject to federal income tax withholding).
  5. LLC’s – Owner participation varies based on the way the LLC files taxes (as a Partnership, S-Corp, or C-Corp).

Contribution Limit

Annual Contribution Limits

FSA Plan Type 2022
Health Care $2,750
Limited Purpose $2,750
Dependent Care

 $5,000 
  – If you are married, filing a joint return or you are head of a house

 $2,500
If you are single or married, but filing separate

Adoption Assistance

$14,080
  – Phase-out income thresholds: Begin at $211,160 and end at $251,160

 

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