Taxpayers and employees who can use them, however, can see some significant tax benefits. Consider this: a $2,500 pre-tax contribution can result in a $625 income tax savings for taxpayers in a 25% bracket (and another $155 in payroll taxes). It’s especially advantageous for taxpayers who don’t have quite enough in medical expenses to meet the 7.5% of AGI requirement necessary to deduct expenses on a Schedule A.
If you’re not participating in a FSA (or related plan), ask your tax professional whether such a move makes sense for you. And if you’re not sure whether your employer offers such a plan, ask your HR person.
For more about medical expenses, check out this video:
For more in the series, see:
Taxes from A to Z: A is for Alimony
Taxes from A to Z: B is for Barter
Taxes from A to Z: C is for Capital Losses
Taxes from A to Z: D is for Deductible Taxes
Taxes from A to Z: E is for Educator’s Expenses
- Health Care Reform Bill Affects FSAs
- 7 Ways to Save On Your Taxes Now.
- The A, B, C and Ds of Medicare
- Taxes from A to Z: T Is For Tuition and Fees Deduction
- The Cost Of Health Care Insurance, Taxes and Your W-2
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