Flex account not subject to social security?

[Deleted]

I read an article on Yahoo today that had a link to some article (Forbes? Kiplinger's, or something like that) that had a calculator for figuring out how much the 2% tax break on social security taxes was going to add to your pay check.

I was startled that it not only asked your salary, but it also asked how much you were contributing to a flexible spending account.

That leads me to ask if the flexible spending account is somehow exempt from social security? We always run short and could definitely add more next year if that's the case. But I already only take home about 50% of what I earn so I've been hesitant.

[LlamaLlamaDuck]

Your Flexible Spending Account (FSA) contributions should be deducted pre-tax from your paycheck. FSA dollars are not subject to Federal tax, SS or FICA.

[Deleted]

I knew they were "pre-tax," but I didn't know that included SS (which IS FICA, I believe). Are they pre-medicare, too?

My total earnings seem to show up on my SS statement although I can't be sure of that since I do so many small jobs during the year like Saturday School, etc.

Thanks so much for the info, Llama. Interesting name, by the way.

[Deleted]

Oh, wait . . . it just dawned on me that I have a different year for flexible spending than the rest of you guys. Mine runs Oct. 1-Sept. 30 (with only 11 deductions) so I have already basically done my election for 2011.

Maybe the info will help someone else, though.

[haapai]

Nope. HSAs (at least the through-work variety) are the same. It's also an above-the-line deduction, which comes in handy when you are attempting to manipulate AGI and don't have a whole lot of income or cash to spare.

Many state income tax returns use AGI as a starting point, so any deductions before the line also reduce your state income tax liability.

When money is tight, it can be surprisingly difficult to make taxable income non-taxable by increasing your 401(k) or traditional IRA contributions because social security if taken out of earnings whether or not it gets shunted into a retirement account. (Trying to reduce your AGI by $2600 a year by increasing your 401(k) contributions by $50 a week will leave you with a shortfall of $3.83 a week if social security is taken out of those earnings. ) HSAs and FSAs are a way around that problem, though you usually have to be very organized and decide on your contribution level in October or November of the previous year.

[happytraveler]

My understanding is that so long as your HSA contributions are deducted directly from your pay check (in other they words they are made as a part of your employer's plan), those contributions are not subject to soical security or medicare taxes. One things to note--while it would likely be a small effect, these contributions reduce your Social Security Wages, and could reduce the future Social Security Benefits to which you would be entitled had you not made the HSA contribuions.

[Deleted]

One things to note--while it would likely be a small effect, these contributions reduce your Social Security Wages, and could reduce the future Social Security Benefits to which you would be entitled had you not made the HSA contribuions.

Good point. It doesn't matter, though, since this tax cut wasn't even a twinkle in someone's eye when I had to make my decision about contributing. Our flex year runs from Oct. 1-Sept. 30. They also only take out 11 payments since your last payment from the district would be in August if you didn't return the following year for whatever reason.

I'm investing my SS savings toward retirement. Everyone says it isn't going to be there so this is our chance to show that if the tax was reduced, the public would be "smart" about how to use it. As if . . .

I

[happytraveler]

Jan 1, 2011 15:27:10 GMT -5 southernsusana said:

One things to note--while it would likely be a small effect, these contributions reduce your Social Security Wages, and could reduce the future Social Security Benefits to which you would be entitled had you not made the HSA contribuions.

Good point. It doesn't matter, though, since this tax cut wasn't even a twinkle in someone's eye when I had to make my decision about contributing. Our flex year runs from Oct. 1-Sept. 30. They also only take out 11 payments since your last payment from the district would be in August if you didn't return the following year for whatever reason.

I'm investing my SS savings toward retirement. Everyone says it isn't going to be there so this is our chance to show that if the tax was reduced, the public would be "smart" about how to use it. As if . . .

I

I happen to think Social Security will be there in some manner or form when we all retire, but regardless, putting aside the current payroll tax savings is a great idea. I know this becasue I am doing it too! LOL.