Pre-tax benefits are a powerful tool for saving money and maximizing your income. From flexible spending accounts (FSAs) to health savings accounts (HSAs) and commuter benefits, these options offer significant advantages if managed wisely. As the new plan year kicks off, it’s the perfect time to dive into the basics, understand how these benefits work, and learn how to make the most of them. Here are some essential tips to help you navigate the early stages of the plan year.
1. Know Your Pre-Tax Benefit Options
Flexible spending accounts (FSAs): An FSA allows you to set aside pre-tax dollars for eligible healthcare expenses. This includes copayments, deductibles, prescriptions, and more.
Health savings accounts (HSAs): HSAs are available to those with qualifying high-deductible health plans (HDHPs). Contributions to an HSA are tax-deductible, and withdrawals for qualified medical expenses are tax-free. Plus, the funds can roll over year after year.
Commuter benefits: If you commute to work using public transportation or pay for parking, commuter benefits allow you to use pre-tax dollars to cover these expenses, saving you money on your daily commute.
2. Understand Contribution Limits
Each type of pre-tax benefit has specific contribution limits set by the IRS. Reference your specific account limits and plan your contributions accordingly to maximize your tax savings without exceeding the allowable amounts.
3. Plan for Qualified Expenses
Take some time to review what expenses are eligible for reimbursement under each type of pre-tax benefit.
For FSAs, this might include medical appointments, prescriptions, dental work, and even certain over-the-counter health items.
HSAs cover a broad range of medical expenses, from doctor visits and surgeries to prescription medications and even some alternative treatments.
Commuter benefits can be used for public transportation, parking fees, and even expenses related to vanpooling.
4. Budget Wisely for Expenses
Estimate your expenses for the year ahead. This could include routine check-ups, dental cleanings, vision exams, and any known medical procedures.
By contributing the appropriate amount to your accounts, you can spread out these costs over the year and enjoy the tax benefits.
5. Keep Track of Expenses and Receipts
Maintaining records of your eligible expenses is crucial for reimbursement and tax purposes. Access online portals or mobile apps where you can easily upload receipts and track your spending.
6. Be Mindful of Deadlines
Stay on top of important deadlines for your pre-tax benefits, such as enrollment periods and submission deadlines for reimbursement.
Missing these deadlines could mean losing out on the opportunity to use the funds you’ve set aside.
7. Explore Other Perks
Some employers offer additional perks with their pre-tax benefits, such as wellness programs or discounts on health-related products and services.
Take advantage of these extras to further enhance your well-being while saving money.
8. Consider Long-Term Savings with HSAs
HSAs offer a unique opportunity for long-term savings. The funds you contribute can be invested, similar to a 401(k) or IRA, allowing them to potentially grow over time.
If you’re relatively healthy and don’t anticipate using all your HSA funds for current expenses, consider treating it as a retirement savings vehicle. Just be sure to become familiar with the rules governing withdrawals after age 65.
9. Educate Yourself
Take advantage of resources provided by your employer, such as informational sessions, webinars, or printed materials. The more you understand about your pre-tax benefits, the better equipped you’ll be to make informed decisions.
Pre-tax benefits can be a game-changer when it comes to managing your finances and saving money on everyday expenses. By taking the time to understand your options, plan wisely, and stay organized, you can make the most of these benefits throughout the year. Whether it’s saving on healthcare costs, reducing your commuting expenses, or building a nest egg for the future, pre-tax benefits are a valuable tool on your financial journey.
The material in this blog is presented for informational purposes only and such information is believed to be accurate as of the publication date; however, it is subject to change.
Benefit Resource and BRI are tradenames of Benefit Resource, LLC. Benefit Resource, LLC is an affiliate of Inspira Financial Health, Inc. and Inspira Financial Trust, LLC. Benefit Resource, LLC does not provide legal, tax or financial advice. Please contact a professional for advice on eligibility, tax treatment and other restrictions. Inspira and Inspira Financial are trademarks of Inspira Financial Trust, LLC.
