Flexible Spending Accounts (FSA)

Flexible spending accounts (FSAs) are one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer in the U.S. An FSA allows an employee to set aside a portion of his or her earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses, but often for dependent care and other expenses. Money deducted from an employee’s pay into an FSA is not subject to payroll taxes, resulting in substantial payroll tax savings.