Sidnoy - You should not have to subtract out the money you had deducted from you paycheck to put in a FSA. FSA is money withheld from your paycheck and then reimbursed back to you for medical expenses that you paid out of pocket, so it is still medical expenses you paid for even though the benefit is that you don't have payroll taxes withheld on it. Do a search on the irs.gov website for FSA, but I'm pretty sure this is correct.