With consumers continuing to feel the sting of one of the largest economic downturns in history, New York State Comptroller Thomas P. DiNapoli is reminding New Yorkers to set aside pre-tax money for eligible health care and dependent care expenses by enrolling in employer-sponsored flexible spending accounts.
"Health care and child care costs are getting more expensive," DiNapoli said. "Flexible spending account programs let families keep more of their money. They're a great tool to help save. Contributions are tax-exempt, but you have to be careful. If you don't use the money in your account by the end of the year, you could lose it."
In New York State, employers may offer two programs that provide this pre-tax benefit: a Health Care Flexible Spending Account (which is different from a Health Savings Account) and a Dependent Care Flexible Spending Account. For 2009, employees may deduct up to $5,000 per household in the dependent care account. While there is no official IRS limit to the amount of money that can be contributed to a Health Care account, many employers impose their own limits (New York State employees have a $4,000 limit for unreimbursed health care expenses).
DiNapoli is encouraging New Yorkers to speak with their employers to find out the deadline for enrolling in one or both of these accounts for the 2009 calendar year (the open enrollment period ends on Nov. 14 for New York State employees). Participation in these accounts doesn't roll over, so even if you participated in your employer's flexible spending program in 2008, you will have to re-enroll in 2009.
DiNapoli is also reminding New Yorkers who are eligible for the Earned Income Tax Credit that contributing to a flexible spending account has the effect of lowering your taxable income, and could therefore increase the amount of your credit under the EITC program.