Many of us have medical and dependent care flexible spending accounts (FSA) through our employers. These accounts use pre-tax dollars to cover medical and dependent care expenses for ourselves and children. But what many people don’t know is that these funds can also be used to care for our aging parents. The details of what is covered can vary, so check with your employer, and your tax advisor for specifics.
In general, the money in your FSAs can be used on your parents if they qualify as your dependent. Two types – a medical care or health care FSA and dependent care FSA – are typically offered through an employer. The dependent qualifications and use of the funds depend on which FSA you have (caregivers often have both).
With a medical care FSA, if your parent qualifies as your dependent, you can pay for their co-pays for doctors or hospital visits, and anything else not covered by your parents’ insurance.
A dependent care FSA may be what you’ve traditionally used to fund your child’s care while you’re working. If you have a parent living with you, you can pay their expenses with this account, too. The standard is higher than the medical FSA. The individual must be physically and mentally unable to care for themselves, which requires you to pay for someone to care for them while you work.
When you’re faced with using it or losing it in your FSA accounts, consider how caregiving expenses may benefit you during tax season.