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Smart ways to pay less on rising healthcare cost
Ep. 1044
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1044. Are rising healthcare costs ruining your budget? Laura answers a listener’s question about how to maximize every tax advantage available for healthcare costs. You’ll learn the rules for deducting them on your tax return or paying them with tax-advantaged savings accounts like HSAs and FSAs. We’ll cover which expenses are tax-free and simple strategies to optimize your healthcare spending.
Key Takeaways:
- You can only claim the medical tax deduction if you itemize deductions on Schedule A instead of claiming the standard deduction on your tax return.
- You can only deduct unreimbursed healthcare expenses that exceed 7.5% of your adjusted gross income (AGI), making the medical deduction best for years with high medical bills.
- Tax-advantaged medical savings accounts are powerful because they allow you to save 20% to 35% on qualified costs without claiming a medical deduction.
- Health savings account (HSA) balances roll over forever, can be invested for tax-free growth, and can be withdrawn penalty-free for non-medical expenses after age 65 (subject to ordinary income tax).
- Flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) are employer-sponsored perks for cutting healthcare costs.
- You cannot claim an itemized medical deduction on Schedule A for any healthcare expense paid for or reimbursed using pre-tax funds from an HSA, FSA, or HRA.
- Lawmakers have expanded HSA, FSA, and HRA qualified expenses to cover various over-the-counter (OTC) medications and products.
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Transcripts available at QuickandDirtyTips.com.
Email: Laura@LauraDAdams.com or leave a voicemail: (302) 364-0308.
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