If you haven't heard of flexible spending, now is the time to learn! Flexible spending is a plan that takes pre-tax dollars from your paycheck and puts them into an account (or accounts) for medical/dental/childcare expenses. This is done directly through your employer once a year.
Now, let me begin by saying that I am by no means an expert, and you should consult your human resources and/or a tax advisor.
So, if your employer offers it, flexible spending can save you EXTRA money on your taxes. Who doesn't want that?! You may put up to an employer determined dollar amount (usually between $2500 and $5000) per year into each account (medical and childcare). At the beginning of the pre-determined year (varies depending on the employer), ALL of these funds are available to you immediately. Then, you will pay them back with an automatic withdrawl from your paycheck with pre-tax dollars.
What does this mean to you? This means that your co-pays, dental bills and eye exams/glasses AND childcare (or preschool!) is now 100% tax deductible. If you do not have a flexible spending account, most medical expenses are only deductible if you spend over 6% of your annual income on them (if your insurance is taken out pre-tax that doesn't count). Childcare expenses are deductible at a percentage based on your tax bracket. So, to make it simple, say I spend $1000/year on childcare. Without flexible spending, if I am in the 15% tax bracket, I may deduct only $150. However, if I use the flexible spending, that entire $1000 is now deducted pre-tax! That also effectively lowers your taxable income - so you will actually see less taxes come out of your paycheck.
Now, one more benefit: they will often supply you with a debit card! This may cost you a few extra dollars per year - but it's well worth it. With the debit card, you no longer have to worry about coming up with that co-pay or deductible. If no debit card is offered, don't stress. You will simply pay the bill, then turn in your receipt for a quick reimbursement.
Like I said before, I am not an expert. I do strongly recommend you speak with your human resources department and/or a tax advisor. Here is a link to help you learn a little more: gotta love Wikipedia!
