If you're like most Americans, you probably regularly search for ways to cut corners, spend smarter, and stretch your paycheck. One area to prioritize is healthcare. Using pre-tax accounts like a Health Spending Account (HSA) or Flexible Spending Account (FSA) can help you save money on eligible healthcare expenses.

What is an FSA?

A Flexible Spending Account (FSA) is a pre-tax benefit account used to pay for eligible medical, dental, and vision care expenses that aren't covered by your insurance plan. FSAs are employer-sponsored — you can't get one on your own. Contributions are made through payroll deductions before taxes are applied, which lowers your taxable income.

According to Healthcare.gov, an FSA can be used to pay for copayments, deductibles, some drugs, and some other healthcare costs. Check with your employer to find out which items and services are covered under your plan.

How does an FSA save you money on taxes?

Money contributed to your FSA is deducted from your paycheck before federal taxes, Social Security taxes, and most state taxes are calculated. This means you're using pre-tax dollars to pay for eligible healthcare expenses, effectively reducing your overall tax burden.

For example, if you contribute $2,000 to your FSA and you're in the 22% tax bracket, you could save approximately $440 in federal income taxes alone — plus additional savings on Social Security and state taxes.

How much can I contribute to an FSA?

The IRS sets annual contribution limits for FSAs. For the current plan year, employees can contribute up to the maximum allowed under IRS guidelines. Your employer may also set lower limits, so check your plan details. Unlike an HSA, both you and your spouse can each have an FSA through your respective employers.

You can use our FSA calculator to estimate how much you could save by contributing to an FSA.

If I leave my employer, can I still keep my FSA funds?

Generally, FSA funds are tied to your employer. If you leave your job, you typically lose access to any remaining balance in your FSA unless you elect COBRA continuation coverage. It's important to plan your FSA contributions carefully to use up your balance before leaving your employer.

Some employers offer a grace period or carryover option that allows you to use remaining funds after the plan year ends, but these provisions vary by employer.

1. Carefully estimate your annual expenses

Take time to review your past healthcare expenses to estimate your spending for the coming year. Consider recurring costs like prescriptions, regular doctor visits, dental cleanings, eye exams, and any planned procedures. A realistic estimate helps you avoid contributing too much (and potentially losing unused funds) or too little (and missing out on tax savings).

2. Spend wisely on eligible expenses before the year ends.

As the end of your plan year approaches, check your remaining FSA balance and make a plan to use it. Schedule those appointments you've been putting off, stock up on eligible over-the-counter items, or browse the FSA store for FSA-eligible products. Remember, most FSAs operate on a "use it or lose it" basis, so spending wisely before the deadline is key.

3. Remember to re-enroll in your FSA.

Unlike some other benefits that automatically renew, FSAs require you to actively re-elect your participation during your employer's open enrollment period each year. If you don't re-enroll, you won't have an FSA for the coming plan year — even if you had one previously. Mark your calendar and make re-enrollment a priority.

Use your flexible spending know-how.

Now that you know the basics of FSAs and how to make the most of your benefits, put that knowledge to work during open enrollment. Take a few minutes to review your options, estimate your expenses, and elect the right FSA contribution amount for you and your family.

Your future self will thank you for taking the time to plan ahead and save on healthcare costs with your FSA.