A Flexible Spending Account (FSA) is an arrangement through your employer that allows you to pay for many out-of-pocket medical expenses with tax-free dollars. You decide how much to put in an FSA, up to a limit set by your employer, and you arent taxed on this money. You can use FSA funds to pay for expenses such as insurance copayments, deductibles, qualified prescription drugs, insulin, and medical devices. You can also spend FSA funds on prescription medications, as well as over-the-counter medicines with a doctors prescription. FSAs may also be used to cover costs of medical equipment like crutches, supplies like bandages, and diagnostic devices like blood sugar test kits. If money is left at the end of the year, the employer can offer one of two options: you get 2.5 more months to spend the leftover money, or you can carry over up to $500 to spend the next plan year. However, FSAs are a “use it or lose it” account, meaning that your employer can keep funds you haven’t used by the end of the year. To enroll in an FSA, you usually sign up once a year during open enrollment.