A Health Reimbursement Arrangement (HRA)
With an HRA, your employer reimburses you for certain medical expenses up to a maximum amount for the year. Your employer may offer an HRA with other health savings plans, such as FSAs. Often, an HRA is paired with a high-deductible health plan, but you can have an HRA without having that type of plan, too.
Requirements: Your employer has to offer HRAs. If you're self-employed, you're not eligible.
Amount you can save a year: There is no maximum limit on how much your employer can set aside.
Benefits: Your employer entirely funds an HRA. You don't even have to pay taxes on the amount your employer contributes. Plus, you might be able to carry the money over from one year to the next.
Warnings: As with other savings plans, you'll only be reimbursed for qualified medical expenses.
A Dependent Care Flexible Spending Account
You can use this type of savings account for a child's day care or for adult day care, such as for your spouse, parent, or grandparent.
Requirements: The dependent you want to cover must live in your home at least 8 hours a day. Children must be 12 or younger unless they have a disability.
Amount you can save a year: You can put up to $2,500 a year in this account if you're single. If you're married and file a joint tax return, you can put up to $5,000 a year in this type of account.
Benefits: The day care can be in your home, a sitter's home, or a day care center.
Warnings: You can't claim expenses reimbursed from an FSA as part of the dependent care tax credit on your tax return.
As with an FSA account, you must use the funds during the benefit year. If you don't, you'll lose the money left in the account.