deducting medical expenses

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How to Start a New Health Plan Off on the Right Foot

Welcome to a new year, with new health benefits. You just chose a new health plan and now it’s in full effect. But most people don’t have a full understanding of how their benefits work. This means that many of them end up losing money in their spending accounts, paying more for care, or getting claims denied.

Follow these tips to make sure you start off 2013 right.

Plan for your Deductible
Guess what–deductibles have gone through the roof over the years, so that often means more cash out of your pocket. If you are one of the 65% of people who have a high deductible health plan, it’s especially important for you to plan your spending. High deductible health plans (HDHPs) come paired with Health Savings Accounts (HSAs), or accounts where you can save money just for medical expenses free from taxes. To be best prepared, you should plan to save at least the amount of your deductible in your HSA as soon as possible.

Network It
Most health plans have some restrictions on what providers you can see or they cover much more on visits to in-network providers. Find out the type of plan you have and whether you have a provider network. HMO plans are the most restrictive–don’t even think about going to a non-network provider unless you want to pay the full cost. PPOs have some more flexibility, but services in-network will be less expensive. POS plans give you more freedom, but often involve more paperwork for out-of-network visits. And finally, FFS plans allow you go to any provider you want, but few companies offer this option anymore.

Get Spent
Did you sign up for an FSA or HRA? Don’t forget about the money in your account. These funds disappear if you do not spend it by the end of the year. Do some planning now by finding what eligible expenses you expect this year so that when they come up, you’ll know to pay with your FSA or HRA, insteading of other funds. If you have an HSA, the same “Use it or lose it” rule does not apply. Your savings will roll into the next year.

Practice Prevention
All health plans must cover a list of dozens of preventive care services, all free of cost. Get your money’s worth by checking out the list and asking your physician what they recommend. Even if you have a high deductible plan and you have not met your deductible, you can still get these services completely covered, as long as you don’t have a pre-existing condition that already required one of these tests or screenings. Learn more about preventive care here.

Have a Non-Emergency Plan

What do you do on the weekend or in the middle of the night when you’re not sure if a medical condition is serious enough for the ER or can wait for a doctor’s appointment?  Most health plans have a variety of options for these uncertain situations such as nurse advice lines or extended-hours urgent care. Know your options so that if you’re caught in the situation, you can choose to avoid an expensive ER visit. Of course, always go to the ER if you are having a life-threatening emergency.


Last Minute Tax Tips

It’s almost April 17th. Yes, the IRS gave us all an extra two days for the 2012 tax filing deadline. Don’t forget that Simplee’s here to help you with your taxes!

If you still haven’t filed, and need some help figuring out your medical deductions, Simplee has you covered. Here’s what you can do in:

Less than 30 seconds – Log in to your Simplee account for a quick look at your medical expenses for 2011. The dashboard makes it easy to bring up claims only for the last year.  If you have dependents, you can also add in their medical expenses. Keep this figure on hand—you’ll need it soon.

Less than 1 minute – Pull out your 1099-SA. If you have an HSA, this will have been mailed to you by the HSA administrator. Use it to complete Form 8889.

Less than 2 minutes – Once you have your Adjusted Gross Income figured out, take 7.5% of it and compare this to the medical expenses from your Simplee account. If your expenses exceed 7.5% of your income, congrats! You can itemize your expenses for a bigger deduction. If not, you’re done—there’s nothing more you need to do with your medical expenditures for this tax year.

If the numbers are close, keep reading—you still might qualify for a deduction:

Less than 10 minutes (if you’re organized) – Gather up any other Qualified Medical Expenses which might not be in your Simplee account. This could include anything from premiums to travel expenses for medical appointments, or from acupuncture to improvements to your home for medical reasons. The IRS has a complete list. Make sure you have receipts or some other kind of record for each.

??? minutes – File those taxes! If you are itemizing, you need to use Form 1040 (not 1040A or 1040EZ).  If your expenses are not high enough to itemize, then the form doesn’t matter, unless of course, you’re itemizing for other reasons. You can deduct the amount of medical expenses that exceeds 7.5% of your Adjusted Gross Income. For example, if your income was $60,000, then 7.5% is $4,500. If you spent $5,000 on medical expenses, you can only deduct $500, the amount that exceeds $4,500.

For more details, see Taxes & Medical Expenses: What You Need to Know Before You Begin.


Taxes and Medical Expenses: What you Need to Know Before You Begin

You know that you can claim some tax breaks on your health care spending.  And that HSAs and FSAs are supposed to be a great tax-free ways to save for medical costs.

But now that it’s time to file your taxes, where do you start? And what do you need to prepare to be ready to file?

Let’s boil it down to the essentials here.

There are two main places in federal income taxes where you need to worry about medical expenses: your itemized deductions and your HSA.  If you have an FSA or HRA, don’t worry. There’s nothing additional you need to do with these accounts for your income taxes.

For Itemized Deductions

 Decide if you’re going to itemize. When you decide to itemize your taxes, you’re choosing to claim all the deductions that you qualify for, item by item, instead of taking the standard deduction. The standard deduction is the same for everyone of each filing status (single, married, etc), so you’ll save more money by itemizing if your own deductions exceed the standard deduction.

When it comes to health care expenses, you need to have spent a lot on Qualified Medical Expenses to be eligible to itemize. What is a lot? The IRS says 7.5% of your Adjusted Gross Income (AGI). If you didn’t spend this much in 2011, don’t bother itemizing health expenses. You can count spending for any of your dependents or your spouse. Any spending that exceeds 7.5% is deductible.

Just about anything related to diagnosing and treating injury or disease counts as a Qualified Medical Expense. For a complete list:

To itemize, you’ll need Form 1040. You cannot itemize with the 1040EZ or 1040A.

For HSAs

 Look for your 1099-SA in the mail. This form will be sent by your HSA administer and will show both how much was contributed to the account and how much was withdrawn (distributed). HSAs are not subject to the same 7.5% of AGI as are deductions. Use your 1099-SA to complete Form 8889—the form just for reporting HSA contributions and distributions.

If you already paid a large chunk of money on medical expenses in 2011, but didn’t contribute as much to your HSA to match, there’s a way to still get that money counted as a tax-free HSA contribution. In fact, up until April 15th, your HSA contributions will still be considered a part of 2011. And as long as the cash amount of your contributions for the year matches your expenses for the year, they’ll count.

To take advantage of this, first find out how much you contributed to your HSA in 2011 (log in to your Simplee account to see). The annual maximum contribution is $3,050 for a single person, $6,150 for a family. If you’re below your limit, determine much you already spent in out-of-pocket medical costs (also on Simplee!). Deposit as much of this as you can, up until the limit, into your HSA. If you can’t afford to keep that much in your HSA at the moment, no problem—you can now withdraw it as cash, but still get the HSA deduction on the amount.

So for example: Let’s say you’re single and contributed $2,000 to your HSA last year. And you had $800 in out-of-pocket medical expenses, which you already paid. You still have a lot of room before you reach your limit of $3,050—almost $1,000. You can deposit $800 in your HSA, and then immediately distribute it. You’ll get the full deduction on that $800 through your medical expenses, as well as the full amount counted towards the HSA tax benefit.

And finally, keep receipts and records. You don’t have to submit these with your taxes—all you need is just one number: how much your Qualified Medical Expenses turned out to be. However, you should keep the proof on hand in case you are audited.

These rules will apply to most people. However, if you’re self-employed, your situation might be different. Visit or talk to a tax advisor to get the best advice.