One of the key benefits of a flexible spending account is that the funds contributed to the account are deducted from the employee's earnings before they are made subject to payroll taxes. As such, regular contributions to an FSA can significantly lower an employee's annual tax liabilities.
There are limits to how much can be contributed to an FSA account per year. For medical expense FSA accounts, the limit is set by the employer, while the specified limit for dependent care accounts is $5,000 per year.