A tax break is a welcome addition for anyone looking for ways to save money, which is why some people opt to take advantage of healthcare flex accounts. By making contributions to an account, you have the opportunity to set money aside for various health-related expenses and save on your taxes simultaneously.
What are Healthcare Flex Accounts?
They are accounts that allow you to set aside a certain amount of money throughout the year that may not be covered by insurance. You can use the money as a form of reimbursement for out-of-pocket medical experiences including insurance deductible, medicine, and doctor co-payments. But while they come in handy throughout the year, keep in mind that you will lose any money you don’t use in your account by year-end.
Set Aside Your Pre-Tax Dollars
A strategy that many individuals use to get their tax break is set aside some pre-tax dollars from their paychecks. By taking this action, they are able to reduce their adjusted gross income, which in turn reduces their taxable income (the amount of money that the IRS is able to tax). With the taxable income lowered, there’s not as much owed to the IRS on both the federal and state levels. It is for this reason that many decide to contribute some money to their healthcare flex accounts on a pre-tax basis.
How Much Can I Contribute?
Currently, you can contribute up to $5,000 if you are single, head of household, or married, filing jointly; and you can contribute up to $2,500 if you are married, filing separately. The key to getting your tax break, however, is contributing at least 7.5 percent of your adjusted gross income. This is the only way that your account will be deductible. So the key is to figure out how much to contribute to healthcare flex accounts that won’t leave too much leftover while making sure to get your deduction.
If getting a tax break is truly something you want to take advantage of, then healthcare flex accounts are a great route to take. However, if you don’t anticipate significant medical expenses outside of what your insurance covers, try to consider everything associated with an account before diving in so that you can avoid losing money unnecessarily.