“For people covered by an employer’s healthcare plan,” he begins, “there are two important tax-saving options to consider: flexible spending accounts and health savings accounts. Both of these options allow individuals to set aside money for future (eligible) medical expenses.”
“Flexible spending accounts (FSAs), allow an individual to set aside a designated amount of money from each paycheck on a pre tax basis and use it for eligible medical expenses—such as out-of-pocket costs, like co-pays and deductibles—that aren’t covered by their employer or health insurance company. The employer then uses this money to reimburse the account holder for those out-of-pocket expenses.”
“Maybe a patient is prescribed a medical treatment that’s not fully covered by her healthcare plan. She can use the funds from her FSA to pay for this treatment. So, say a patient with excessive underarm sweating has a FSA through her employer,” Braunstein continues, “and she is treated with Botox injections for hyperhidrosis. If the Botox treatment is not covered under her insurance plan, she can go to her employer and say, ‘I’ve spent $500 on a medical procedure. Please reimburse me.’ and she will be reimbursed with the pre tax money set aside in her FSA.”
The amount participants are permitted to contribute tax-free to a FSA was capped at $2,500 in 2013; employers, however, may still add supplementary funds to a participant’s account beyond this amount. Employers frequently offer FSAs in conjunction with their traditional medical plans to help employees cover the “uncovered” medical expenses, like the co-pays and the deductibles.
In the midst of rising healthcare costs and insurance premiums, employers are doing much more to help offset employee medical expenses. According to the 2012 Employer Health Benefits Survey from the Kaiser Family Foundation and the Health Research & Educational Trust, a majority of FSA enrollees were not taking full advantage of the tax benefits and cost savings available to them through the FSA programs. Make sure you are getting the full benefit of your FSA by depositing the maximum amount and by taking full advantage of your employer’s contributions.
The increasing popularity of health savings accounts (HSAs), Braunstein’s second tax-saving suggestion, is another indication of how employers are trying to help their employees manage increasing healthcare costs.
“Like FSAs,” Braunstein says, “HSAs allow an individual to put aside money tax-free to pay for future medical expenses not covered by their insurance carrier. Again, when a participant incurs up-front medical expenses, the employer will issue a debit card or write a check for reimbursement. To be HSA-eligible, participants must be under age 65 and enrolled in a HSA-qualified, high-deductible healthcare plan [high deductible = $1,250 for an individual; $2,500 for a family].”
Braunstein notes the significant differences between these two options. “One important distinction between FSAs and HSAs is that the money in a HSA is yours to keep: You can control how that money is spent and you can keep any interest and investment earnings from the account. You can also continue to deposit money into HSAs for years, right into retirement. FSA money, on the other hand, is only useable during the calendar year in which it was deposited; after that, the money is forfeited," he says.
Self-employed taxpayers aren’t eligible for these employer-based tax-saving accounts; but they do have options for tax savings: Health insurance premiums are tax deductible for the self-employed (unless reporting a loss); they also pay in a little less to Social Security and Medicare than those receiving employer-based benefits.
All taxpayers may be eligible to write off some of their medical costs. Individuals must file itemized tax returns (instead of taking the standard deductions); they are permitted to deduct a portion of their medical expenses from their adjusted gross income if that adjusted gross income meets the specified threshold (see the IRS’s web page on medical deductions for more details).
All our readers should definitely review this long list of items that may be claimed as deductible medical expenses. For someone with hyperhidrosis, for example, the costs related to transportation to and from medical care may be eligible for deduction; so may the costs related to purchasing medical devices to treat a persistent medical condition (like the iontophoresis machine that you’ve had your eye on)….Even the cost of attending a medical conference, if it concerns “the chronic illness of yourself, your spouse, or your dependent” may be eligible for deduction (All of you hyperhidrosis patients who have attended--or hope to attend--one of the IHHS’s live-patient hyperhidrosis treatment seminars—keep that in mind!)….It’s even possible that things like antiperspirants and clothing supplies, which would not normally qualify for deductions, might be eligible for a hyperhidrosis sufferer because, according to the IRS, these items are “used primarily to prevent or alleviate a physical or mental defect or illness.”
The International Hyperhidrosis Society website has a great section on Insurance Tools, so if you've maxed out the support you can get from your insurance provider, check out the options for your out-of-pocket expenses that are not covered…And remember you can always save money on your hyperhidrosis supplies by purchasing them via our hyperhidrosis Deals and Discounts, where the www.SweatHelp.org community members can always catch a price break!
Don’t spend more than you have to on your medical expenses and be ensured that you are getting the most out of your healthcare dollars. Explore these suggestions and all of your financial options for reducing your tax bill with your company’s HR representative or with a qualified CPA, (like our fave, Elliot Braunstein)!
Happy Tax Day!