You have money deducted from your paycheck. No taxes are deducted from that money. So if your paycheck is $2,000 but you have $50 deducted for your FSA you pay taxes on only $1,950.

To get the money you have to spend it on qualifying expenses. including:

+ Co-pays and deductibles on your medical services.

+ Prescription drug co-pays

+ Eyeglasses and contact lenses

+ Over the counter medications (e. g. aspirin) and medical supplies (e. g. bandages)

Check with your employer and/or the company that administers your FSA for more details.

The downside is that it is “use it or lose it”. If you have $600 per year deducted but only have $570 in expenses that year you lose the other $30. But if you watch your account you can stock up on Band-Aids and Tylenol at the end of the year so you don’t lose that.