My Personal Finance Journey

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My $413 Mistake

Contributed by mm | December 12, 2004 6:47 AM PST

Now the 2005 benefit enrollment season is over, I just realized I had a chance to do better. It looks like I made a $413 mistake in my Flexible Spending Account selection.

If you read my discussion on my benefit choice for Flexible Spending Account (FSA), you know I opt for $5,000 in Dependent Care FSA and $1,400 in Healthcare FSA. What I didn't disclose, is I enolled $5,000 Dependent FSA and $400 Healthcare FSA under my name, and signed up $1,000 Healthcare FSA under my wife's name. At that time, I didn't think this can make a difference.

It actually can.

Why? Because I just realized FSA is shield from Social Security Tax too. In the case of my family, my annual job income well exceed the 2005 annual threshold of $90,000. Even if I can deduct $5,400 before social security tax, I still have to pay the 7.65% on $90,000, not a cent less.

If I had enrolled the $5,400 under my wife's name, because her income is well below the $90,000 limit, every dollar enrollment will save 7.65 cents upfront. At $5,400, it adds up to a total of $413, enough for a lot of dining-outs.

If you are in the same situation, I hope your benefit enrollment has not finished yet and you can learn from my experience. Yes, for double-income family, it can still make a difference as of who signs up for which part of the benefit.

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