Flex Account Rules

Living with the Rules

Everyone hates “Rules.”

There are always “Rules” when Uncle Sam gives us a tax break. Your retirement plan has rules. There are rules when you deduct the interest payable on your home loan.
We all like a tax break. Nobody likes Rules. But, Rules aren’t hard to live with once you know what the Rules are.

The “Rules” aren’t hard to live with once you know what they are.

The “Rules”
Flex Accounts enable you to pay for certain expenses . . .TAX FREE. . but you have to:

  • plan ahead because you can only enroll once a year; and
  • your election, with few exceptions, can’t be changed during the year; and
  • any money left in your account at the end of the year cannot be returned to you.

So how can you know, in advance, how much money to put into your Flex Account?

The Secret of living within the rules!

Look for eligible expenses that are “repetitive or predictable” and that you know you will be buying anyway!

  • Repetitive Type Expenses (costs you have all the time)
    Prescriptions – maintenance medications
    Dr. Office Visits – for visits you go to regularly
    Dental cleanings & exams
    Orthodontics / Braces
  • Predictable Type Expenses (costs where you decide when)
    Medical – surgeries where you can decide when to do it
    Dental – fillings, crowns, etc. where you can decide when to do it
    Vision – eye exams & glasses where you can decide when to do it

Work-Related Dependent Care
Use this account to keep the kids, tax free, at the sitter or at daycare while you work. It shouldn’t be too hard to “guess-t-mate” the annual amount paid to them.

** Please note, in the situation of divorce, only the custodial parent may claim expenses through a dependent care flex account.

Knowing The “Secret” makes living with the rules OK.

All these expenses …. are for things you know you will be buying anyway and therefore the “Rules” don’t really mean anything. You know at the beginning of the year how much you will spend ….. you are going to spend the money anyway …. and therefore you will not have to worry about leaving any money in the account at the end of the year.