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Tax Tip: Getting the Most Out of Flexible Spending Accounts

Ingram Publishing/ThinkstockFlexible spending accounts (FSAs) and health savings accounts (HSAs) are a great way for workers to pay medical bills and other forms of spending before paying income taxes.

"The great thing about an FSA is that it's a very good way or an easy way for people to put aside money through their employer to pay for expenses that may not be covered or would not be covered by insurance or other reimbursements," explains Internal Revenue Service spokesman Eric Smith.

That includes health care deductibles and other payments, like co-insurance fees. They work best when you know you have a big medical bill coming, like an operation or even if one of your kids needs braces.

"You can put in up to $2,550, so if you're not doing that now it's one of the things you may want to plan for as you go through the year," Smith says.

For many companies, that FSA has to be spent by the end of the calendar year. Some employers give workers a two-month extension, while others are even more generous and allow a rollover.

"One option is to carry over up to $500 to the next year. If you have that, you have until the end of the next year to spend that money," Smith explains.

In all cases, if you don't use it, you lose it.

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