The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Flexible Spending Accounts||Date: 9/27/2001 1:51 AM|
|Author: ptheland||Number: 54252 of 122308|
We are in the 28% tax bracket and will pay over $7000 next year in day care expenses
Just to quantify the difference, here are the numbers. The max you can put into a FSA for child care is $5000. So your tax savings is your tax bracket (27.5% for 2001) times the $5k max, which equals $1375. Subtract the max child care credit (since you give that up) of $960, and you get a potential tax savings of $415.
What happens if I or my spouse gets laid off? Will we have to continue contributing to this account?
The contributions by the laid off spouse would cease. You can only contribute from your wages while you are an employee.
Is the process of filling out those darn vouchers a pain and are you reimbursed in a timely manner?
That will depend entirely on your benefits administrator. Some are great. Some are so bad that the tax savings doesn't seem worth it. Most are inbetween. The best resource is your co-workers. Try asking some of them about their experience. Just remember to temper their experience with what you know about their ability to follow directions. <grin> I suspect a lot of problems stem from failing to send in complete and correct claim forms.
Since my family's total medical expenses in a year due not trip the 7.5% threshhold for itemizing medical expense deductions, would setting up a flexible spending account for medical expenses also be prudent?
It's certainly a consideration - even if you were over the 7.5% threshold. The big difference is the predictibility of the expenses. Child care is pretty easy to predict. You know pretty close what your expenses will be, and that they'll be quite even through the year.
Medical expenses are harder to predict. With 4 of you, there's a certain amount of prediction - dental cleanings, check up's, perhaps glasses or orthodontics - plus you know that some number of doctor visits are inevitable. Add up your out of pocket for these items as a starting point. How much to go beyond this is a matter of your risk tolerance - balancing the "use it or lose it" risk against the potential tax savings.
--Peter <== celebrating 1,000 posts by posting something useful instead of just an announcement.
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