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             22 November, 2019
 

    
Category:  Articles » Finances » Taxes

 

Saving Money with Tax Free Medical Plans

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2006-11-27 21:23:58     
Article by Erik Alburg

Do you have medical expenses that you incur every single year? Do you always use up your entire medical insurance deductible on co-pays?

If so, there are a couple of medical saving plan available that would allow you to use tax-free money to pay for your medical expenses. That is an automatic 28%+ savings! You see every time you pay the co-pay using your checkbook, credit card, or debit card you are paying with money that has already taxed by the federal, state, and local governments.

The first medical savings plans that allows you to pay for your co-pays with tax free money is called a Flexible Spending Account, or sometimes just called a “Flex Account”. How does a Flex Account work? Simple. You simply inform your employer that you wish to set a portion of your paycheck aside for medical expenses. To do this you will need to visit your Human Resources department and fill out the appropriate form. And then each pay period, the designated amount of money is withheld from your check, tax free, and deposited in a savings account for you to use for your next doctor’s visit. And the best part, since you are withholding the money tax free, you will pay less in taxes at the end of the year. It’s a win-win.

The second medical savings plan is called a HSA or Health Savings Account. Due to the rising cost of medical expenses, our government has come up with what is known as a high-deductible savings plan for medical expenses. How it works is this, you can set aside money, tax free, into an account that you own. What this means is that if you decide to change jobs or quit entirely, you keep the money and the account. The account is a bank account in your name. What is great about this plan is that most employers will actually put money in this account for you! Every year, my company puts in $2000 for me to use for medical expenses. However there is one catch that you need to know about before pursuing this plan. This is a high deductible plan, which means that my deductible is also $2000 per year. This plan will really pay off if you are a healthy individual, who expenses are less than $2000 per year. Once again, check with your Human Resources Department to get more details on this type of plan.

By using these two plans you can save a tremendous amount of money on your medical expenses and in the process reduce the amount of taxes you will pay at the end of the year. If you have “planned medical expenses” every year that it will benefit you by planning ahead and investigating one of these tax free plans.

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