taxes

Use or lose your flexible spending account

Medication review

Also consider cleaning out your medicine cabinet, says Turney.

"Throw out expired medications and replace them," he says. "Look at maintenance medication. Many people now get prescriptions in three-month supplies." If you're able to refill those multimonth orders now (or by March 15), you can be reimbursed from FSA money.

In 2011, however, a former FSA benefit got less beneficial.

Previously, you could use FSA money to pay for over-the-counter medicines. That's still possible, but now a health care reform law provision requires that you get a doctor's prescription for over-the-counter treatments before you can file the expense as an FSA claim.

Overlooked FSA expenses

Some other expenses you might not have considered -- but that are usually allowed under FSA plans -- are first-aid kits, blood-pressure monitors, thermometers, and neck, wrist or other joint braces.

Check your store receipts when you buy medically oriented items. Many retailers include notations as to which purchases are FSA-eligible. You also should check with your benefits manager before you buy an item if you have any questions about its FSA eligibility.

And don't forget about the cost of getting to medical offices, says Turney. The tax code rules on medical mileage reimbursement apply to FSAs, too.

Allowable transportation costs include not only mileage or actual car expenses for travel primarily for and essential to medical care (you must use one travel reimbursement calculation method), but also bus, taxi, train or plane fare, or ambulance service and parking fees and tolls.

Just be sure you don't also count your travel costs as itemized medical deductions on Schedule A. Your FSA money is not taxed, and the IRS frowns on such tax-deduction double-dipping.

Bankrate Audio

Use or lose your flexible spending account

Transcript

The holidays are a hectic time of year, but there's one tax-related task you can't overlook.

If you have a medical flexible savings account, or FSA, you need to check its balance and make sure you don't end up wasting that money.

FSAs are popular for a couple of reasons.

First, you can use the account money to pay for items and services that aren't covered by your health insurance.

Second, these workplace-provided accounts save you tax dollars. The amounts are taken from your paycheck before your withholding taxes are calculated, so you owe a bit less in federal income and Social Security taxes upfront.

But FSAs have one drawback. If you don't use the money by the end of your benefits year, you'll lose it. For most people, that deadline is Dec. 31.

So before the end of the year, use that money up. Maybe you need a vision exam, an extra pair of glasses, or a dental checkup. Make that appointment before January 1.

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