by Sam Peterson
Facing problems when it comes to medical expenses is nothing unusual, unless you’re close to perfect. These problems are mostly related to the either the expenses or the prescriptions.
A lot of you would associate these issues with the medical administrations and diplomatic approaches of doctors. However, instead of lamenting on the errors and bureaucratic issues, there are number of ways of normalizing your medical expenses.
Itemized Deduction
One way of saving on your medical expenses is via an itemized deduction. An important editing in the deduction figure has been made by Obama’s administration for this year. If the medical expenses exceed 10% of your gross income, there is a deduction which is known as the itemized deduction.
There is an option associated with having either an itemized deduction or a standard deduction. The previous rate of expenses was 7.5% of the adjusted gross income. Itemized deductions have become important in light of the healthcare policies of Obama’s regime. Premiums for medical insurance would also fall in the category of itemized deduction.
The percentage for itemized deduction has been at the center of many debates with many believing that the 10% mark would make it difficult for taxpayers to be eligible. However, with the Obama’s bill on healthcare making insurance mandatory, the premiums for insurance would fall in this range, benefiting the tax payer.
In addition to the conventional itemized deduction, there is a miscellaneous itemized deduction. The limit in this case is 2%, which allows more taxpayers to opt for this option.
The thresholds for itemized deductions are decided by the Internal Revenue Code. One of the main factors that are part of the itemized deduction is the consumer price index and how the cost of healthcare is faring in the country. These are later adjusted for inflation and the final rate is decided. The limitation for itemized deduction can be reduced by a vote in the Congress. This has been done in 2010.
If all of this seems confusing to you, ask your tax accountant or CPA about how you can take advantage of this benefit.
Using Flexible Spending Accounts
While these are not applicable in all cases, it is possible for a number of employees to set up a flexible spending account. This helps in saving pre-tax money following payroll deduction, so the reimbursement rate would increase for you.
Another extension of these accounts for saving idea is that of the health reimbursement accounts. These are special offers part of your employee benefit program. The reimbursement done in this case for your medical expenses is tax free and a better option.
Next, there are health saving accounts which can be set up by your employer. It can be done on an individual basis or via a group plan. The similarity between flexible saving accounts and health savings accounts is that both are pretax.
The major advantage of health savings accounts is that they can be used as a savings fund. The medical expenses that you pay through this account are tax free (tax does take a toll on your budget normally).
Deductions on Prescriptions and Diagnosis
Another important thing in the healthcare revenue cycle is the understanding in what cases warrant tax deductions. For example, tax deductions are possible for diagnosis, treatment, prescriptions for cure and related costs.
On these accounts, various costs can be made. You can get tax deductions on the expense for medicines which have been prescribed by your doctor or any medical professional. Another cost that many people would be unaware of in terms of tax deduction and reimbursement is that of the transport cost which was introduced back in 2010.
However, it is important for you to note that items like over the counter drugs, multivitamins and supplements would not fall under the tax deduction category. In certain cases, doctors can prescribe you controlled substances like medical marijuana. Tax deductions are not possible in that case as well.
It All Adds Up
People who talk of the non-uniformity of the process should know that it is possible to add up your medical expenses tax credit over a period of time. The problem is that we most often do not keep track of it.
If you do this, you would find that at the end of the day, you are really making worthwhile savings. Another thing is that each year, new therapies and treatments are added on the deduction list, so another thing you can do is to keep updated about the new ones. For example, in 2012, deductions were made available for anti-coagulation therapy.
All you have to do is your homework, and there’s a lot you can save on your medical expenses and troubles.
(Sam Peterson is a healthy living blogger who writes regularly about various topics in health care, exercise and nutrition. Her last article for healthonabudget.com was about six essential items for your home gym. )
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