Advantages of using an HSA or FSA

Advantages of using an HSA or FSA

In order to deduct medical expenses off of your taxes, they need to reach 10% of your adjusted gross income per the IRS rules. Did you know there’s a way to reduce your tax burden on medical expenses even if you’re under that 10% threshold? You can do it by using an HSA, FSA, or other tax-favored plans. There’s a lot of legal jargon in the references. The main gist is if your employer offers one of these options it would be a good idea to take advantage. Just make sure to read and understand whatever paperwork they give you to describe the plan and its features.

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Medical Expenses and Taxes

First and foremost, the rules change every year. I’m not a tax expert. My information comes from the IRS website. It’s important to consult a tax professional if you need help with your taxes. Now that the legal stuff is out of the way…

If you have a ton of medical expenses every year you have three main options as far as taxes are concerned.

  1. Health Savings Account – Pre-tax money for use on medical expenses
  2. Flexible Spending Account – Also pre-tax money for use on medical expenses, but with different rules.
  3. Itemize your taxes and reduce your tax burden by claiming medical expenses as a deduction.

Doing one or two does not prevent you from doing number three, but you can’t use the tax-free money and then claim those medical expenses as a deduction on your taxes.

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