MAKING THE MOST OF YOUR FSA OR HAS FUNDS
With a flexible savings account (FSA) or health savings account (HSA), you can save money- tax-free-from each paycheck and use the funds toward your health care expenses. Did you know that therapeutic massages and acupuncture are included as well? Making the most of the funds you have already allocated, ESPECIALLY in the case of FSAs, is important. This is where the old adage “If you don’t use it, you lose it” comes into play because the funds go back to your employer if the dollars aren't used by the end of the coverage period.
The “coverage period” is defined as one calendar year (ending on December 31st). However, some plans offer a grace period that will allow you to use your remaining FSA dollars until March 15 of the following year.
Typically, your employer conducts open enrollment in the 4th quarter of the year, during which you plan how much money you will need to set aside for the coming year's medical expenses. At the start of the new year your designated funds are withdrawn from each paycheck in small increments and placed into a special account.
These types of accounts are in conjunction with a High Deductible Healthcare Plan (HDHP). With an HSA, you never lose the funds. Any unused funds roll over to the next year and accumulate. HSA dollars never expire and will remain in your account until they are used. If you do not use all of your HSA funds in a given year, the unspent money will roll over into your account for next year. Because these plans are funded with pretax dollars, you and your employer can save hundreds of dollars in federal, FICA and state taxes.
ARE BODYWORK SERVICES QUALIFIED EXPENSES?
Acupuncture and Therapy are Qualified Medical Expenses according to IRS Publication 502.
IRS Publication 502 states:
"ACUPUNCTURE - You can include in medical expenses amounts you pay for acupuncture. THERAPY - You can include in medical expenses amounts you pay for therapy received as medical treatment. Deductible medical expenses may include but aren't limited to the following: Payments of fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners."
The IRS ruling states that medical care expenses must be primarily to alleviate or prevent a physical or mental ailment. Examples of illnesses that qualify include carpal tunnel syndrome, stress, back pain, arthritis, diabetes, hypertension, fibromyalgia, chronic fatigue, anxiety, depression and pain management.
Be proactive by getting a prescription from your doctor. Inform your medical practitioner that you have an FSA or HSA and you'd like to use some of your funds toward bodywork therapy for treatment or prevention of your condition. Once you've obtained the prescription, keep it with your tax documents.
Your physician will need to provide three pieces of information on the prescription:
- Medical necessity: why you need the therapy (example: to relieve back pain)
- Frequency: number of sessions per month (ex: min of two sessions per month)
- Duration: length of treatment (example: 12 months)
For any addtional questions, check with your tax consultant.