The race is on to use your flexible spending account

There are only a few days left in the year and many people are rushing to use the funds they have accrued in their flexible spending accounts before their time is up. These "use it or lose it" accounts can be a great way for individuals to pay for medical expenses and save money on their tax bills. Those who find that they still have a balance should be aware of the ways in which they can use their funds before they are forced to forfeit them at the end of the year.

The Internal Revenue Service allows taxpayers to write off a number of medical expenses - so long as the balance exceeds 7.5 percent of their adjusted gross income for the 2012 tax year. Keep in mind that this threshold increases to 10 percent for the 2013 tax year. As a general rule, individuals can typically use flexible spending accounts to pay for items that qualify as deductible medical expenses. While this may include hospital stays and trips to the doctor, many people may not need a trip to their physician at the end of the year, so their flexible spending accounts go unused. Instead, individuals can use their accounts to cover prescription drugs, eye exams, glasses and contacts and dentist visits. Those in need of chiropractic services or acupuncture can also use their flex spending accounts to cover their costs.

There are also several restrictions on what these funds will cover and many health-related products and services are ineligible. This includes nutritional supplements, gym memberships, weight loss programs and cosmetic surgery. Veterinary fees and other pet-related costs also don't count toward these accounts. To avoid any potential issues, individuals should double check with a tax professional to ensure any medical expenses they cover with a flex spending account qualify.

Educate yourself on the 2013 rules

The rules that govern flexible spending accounts are expected to change in 2013 as the provisions of the Patient Protection and Affordable Care Act (ACA) go into effect. For example, beginning on January 1, 2013, a cap of $2,500 will be placed on these accounts for employees. However, this cap applies to individuals and married couples can each contribute up to this amount, for a total of $5,000. In the past, there was no federally mandated limit on the amount workers could contribute, although many companies set their own restrictions on putting more than $5,000 in a flexible spending account.

In addition, if employers offer workers "flex credit," these amounts do not count toward the $2,500 limit unless employees receive the credit as cash.

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