Until this year, there was no tax law limit on contributions to an employer’s healthcare flexible spending account (FSA) plan (although many plans impose their own limits). But the FSA situation has changed beginning in 2013.
Background: Amounts you contribute to the FSA plan are subtracted from your taxable salary. Then, you can use the funds to reimburse yourself tax-free to cover qualified medical expenses that are not reimbursed by insurance.
Starting this year, however, the maximum annual FSA contribution for each employee is capped at $2,500 by law. That doesn’t change the fact that you should take full advantage of your company’s FSA plan if one is offered. Failing to do so is like leaving money on the table. But you may be able to get less taxable benefit from an FSA.