A Limited Purpose Flexible Spending Account (Limited Purpose FSA) is a specialized type of FSA that allows employees to set aside pre-tax dollars to pay for eligible dental and vision care expenses only. It is typically used alongside a Health Savings Account (HSA), enabling employees to maximize their tax savings while complying with IRS rules that restrict using a general-purpose FSA when contributing to an HSA.
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Key Facts
- Purpose: Covers dental and vision expenses only, not general medical costs.
- Compatibility: Designed to be used alongside a Health Savings Account (HSA).
- Tax Advantage: Contributions are pre-tax, reducing taxable income.
- Eligible Expenses: Includes dental cleanings, orthodontics, eye exams, glasses, and contact lenses.
- Limits: Subject to annual contribution limits set by the IRS.
1. What is a Limited Purpose FSA?
An FSA that covers only dental and vision expenses, allowing compatibility with an HSA.
2. Why would someone choose a Limited Purpose FSA?
To save taxes on dental and vision costs while still contributing to an HSA for medical expenses.
3. What expenses can be paid with a Limited Purpose FSA?
Dental cleanings, fillings, braces, eye exams, glasses, and contact lenses.
4. Can Limited Purpose FSAs be used for general medical expenses?
No, they are restricted to dental and vision expenses only.
5. Are contributions to a Limited Purpose FSA taxable?
No, contributions are made pre-tax, reducing your taxable income.
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