As the year comes to an end, remember to look at your flexible spending account (FSA) to see what type of funds remain. In many cases, you need to spend the funds in your FSA by New Year's Day -- or you lose them. In some plans, funds can't be carried over into the next year.
Dependent Care Flexible Spending Account
The money in your FSA can be used on your parents if they qualify as your dependent. Two types – a medical care or health care FSA and dependent care FSA – are typically offered through an employer. The dependent qualifications and use of the funds depend on which FSA you have (caregivers often have both).
Medical Care FSA and Health Care FSA
With this account, if your parent qualifies as your dependent, you can pay for their co-pays for doctors or hospital visits, and anything else not covered by your parents' insurance.
"You can take your parents' expenses that you paid and submit those. Use it, so you don't lose it," says Mary Beth Saylor, a CPA and tax principal with Windham Brannon, an Atlanta-based accounting firm.
While it's good to go ahead and do this by year end, most plans have a grace period of a couple of months after year end, so check with your employer.
Dependent Care FSA
The dependant care FSA may be what you've traditionally used to fund your child's care while you're working. If you have a parent living with you, you can pay their expenses with this account, too.
The standard is higher than the medical FSA. The individual must be physically and mentally unable to care for themselves, which requires you to pay for someone to care for them while you work.
When you're faced with using it or losing it in your FSA accounts, consider how caregiving expenses may benefit you during tax season.