Flexible Spending Account (Limited): Who Qualifies and What You Get
Learn how self-employed individuals can use pre-tax funds for medical and dependent care expenses through this limited account option.
This scheme allows some self-employed individuals to set aside money before taxes are taken out to pay for specific healthcare or childcare needs.
Who it's for
This option is intended for self-employed individuals, though the available choices are more limited than those available to people working for a traditional employer.
What you get
You can use these funds to pay for medical expenses or costs related to the care of dependents using money that has not been taxed.
What it costs you
There is no direct fee to participate, but you must use the money within the specific timeframe set by the rules. If you do not spend the funds by the end of the year, you may lose them.
The catch to know
Because of the strict rules regarding unused funds, many self-employed people find that a Health Savings Account (HSA) is a more effective tool for their needs.
How to apply
- Determine if your specific self-employment status allows for this account.
- Research the specific medical or dependent care expenses you plan to cover.
- Consult with a tax professional to ensure you are choosing the best way to manage your pre-tax funds.