How does a Flexible Spending Account save taxes?
A. Every dollar contributed to the FSA plan is made on a before-tax basis. Your employer deducts the amount that you elect directly from your “gross” wages. This means that FSA plan contributions are deducted before federal, state, and FICA taxes. A person in the 27% tax bracket, for example, would save $270 for every $1,000 contributed to the FSA plan.
