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FSA, HSA, or Dependent Daycare Plan
Bret Brummitt11/28/23 3:53 AM4 min read

FSA, HSA, or Dependent Daycare Plan: What to Know

Maximize Your Tax Savings with an FSA, DCFSA, or HSA: Here’s How!

Tax savings are always a welcome sight. And if you’re an employee with access to a company-sponsored FSA (Flexible Spending Account), Dependent Care FSA (DCFSA), or HSA (Health Savings Account), you have a fantastic opportunity to save money. These accounts offer a range of advantages that can help you reduce your taxable income, save money on eligible expenses, and even boost your overall financial wellness. Let’s dive into the details.  We’ll explore how FSAs and HSAs can be a game-changer for your tax savings strategy.

FSA: Flexible and Accessible

Let’s start with the Flexible Spending Account or FSA. This account allows you to set aside pre-tax dollars from your paycheck to cover eligible medical, dental, and vision expenses for you and your dependents. The key advantage of an FSA is that it lowers your taxable income, providing an immediate tax benefit. By contributing to an FSA, you essentially reduce the amount of income subject to federal and state taxes, which can result in significant savings.

But wait, there’s more.  With the FSA, you have immediate access to your full annual contribution on day one of your FSA plan year.  Your company values you and trusts your working relationship. Therefore they are allowing you full access to your annual contribution amount since they know that medical expenses can’t always be planned or put on a per-paycheck timeline.

Dependent Care Accounts

Technically, this is an FSA account too.  Dependent Care Flexible Spending Account is the proper name and DCFSA is the mouthful of an acronym.

This account can be used to pay for a variety of care services including preschool, summer day camp, before/after school programs, and child or adult day care. The only caveat is that the care must be provided as you (and your spouse if applicable) are working, looking for work, or attending school full-time.

With a DCFSA, working parents can save an average of $100 a month. Learn how in this video! (~2 minutes)

The big difference with the Dependent Care FSA is that you are only able to spend money after you’ve had it withheld from your paycheck.  Money is not advanced to you by your employer on an annual basis in the same fashion as the Unreimbursed Medical FSA account.

HSA: Health and Savings Amplified!

Now, let’s talk about the Health Savings Account or HSA. If you have a qualified high-deductible health plan, an HSA is an excellent tool to consider.

It works similarly to an FSA but with a few added bonuses. First and foremost, HSA contributions are tax-deductible. This means you can reduce your taxable income even further. Additionally, the funds in your HSA can be invested and grow tax-free.  This allows you to build a nest egg for future medical expenses. And the cherry on top? Qualified withdrawals from an HSA are tax-free, making it a triple tax advantage account.

As mentioned above, to be eligible for this savings account, you have to be enrolled in the correct health insurance plan to be eligible.  If you enrolled in a plan that has copays for office visits and prescriptions prior to reaching your deductible, you aren’t in a qualified plan. But if you did forego the convenience of those copays, you are likely in a plan that allows you to save, budget, and spend wisely with the goal of long-term savings beyond just this year.

Eligible Expenses: The Savings Menu

Both FSAs and HSAs offer a wide range of eligible expenses, ensuring that you can save on a variety of medical costs. From doctor visits and prescription medications to dental treatments, eyeglasses, and even certain over-the-counter items (in the case of FSAs), these accounts provide considerable flexibility. By utilizing the pre-tax dollars in your FSA or HSA, you can keep more money in your pocket while taking care of your health and wellness needs.

Plan Smart, Save Smart

To make the most of your FSA or HSA, it’s crucial to plan and budget accordingly. Estimate your annual medical expenses ahead of time and contribute an appropriate amount to your account, as any unused funds may be forfeited at the end of the year (depending on your employer’s plan). Take advantage of online tools and resources to track your spending, submit claims, and stay on top of your account balance. By being proactive, you’ll ensure that you maximize your tax savings and minimize any potential loss of funds.


Whether it’s an FSA or HSA, these company-sponsored accounts are valuable tools that can significantly impact your tax savings and overall financial well-being. By taking advantage of pre-tax contributions, eligible expenses, and the potential for tax-free growth, you can make the most of these accounts and keep more money in your wallet. So, if you have access to an FSA or HSA, explore the possibilities, plan wisely, and enjoy the benefits they offer. Your future self will thank you!


Bret Brummitt

In 2019, Bret launched Generous Benefits, leveraging 20 years of experience in Employee Benefits. His mission is to transform communities through innovative benefits solutions. Bret envisions benefits beyond traditional offerings, aiming for a lasting impact by stretching, tailoring, and curating packages. He coaches insurance agencies with Q4intelligence, actively participating in communities like Health Rosetta and the Free Market Medical Association. Based in Austin, he balances his professional pursuits with running alongside Gilbert's Gazelles and playing baseball with the Austin Blue Jays.

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