At What Percent of My Income Will Health Expenses be Deductible?

Posted in Fee-For-Service Plans , Health Insurance , Point of Service Plans , Save on Health Insurance

February 17th, 2009

Many individuals enjoy health flex accounts and the tax benefits they receive as a result of their use, but those getting started often wonder how much of their contributed money is tax deducible. The amount varies depending on income. Lets take a closer look at these accounts and how they work.

About Health Flex Accounts

Health flex accounts allow individuals who are interested in having money set aside for health care expenses not covered in their insurance the chance to do so. You can have money deducted from your paycheck and placed into this account. By doing so, you can always rest assured that youll have money to cover your out-of-pocket medical expenses, including insurance deductibles and doctor co-pays.

The benefit that participants enjoy with these accounts is being able to have the money deducted on a pretax basis. Doing so allows them the opportunity to lower their adjusted gross income through a deduction.

How the Deduction Works

In order to take advantage of this deduction, your medical and/or dental contributions must total in excess of 7.5% of your adjusted gross income. So if your AGI is $32,000 in one year, then your contributions must exceed $2,400 in order for them to qualify as tax deductible.

For some, this amount is more than they would like to contribute if they feel they wont accrue enough medical expenses. This is especially true when considering that any money left in your account at year-end cannot be recovered. In this case, trying to receive this type of deduction just isnt worth having to figure out how to get rid of the excess funds so as to not lose them.

Its good to note that the maximum contribution amount per calendar year for health flex accounts is $5,000 for those who are single, head of household, or married, filing jointly. And for individuals who are married, filing separately, their maximum is $2,500. Before making your own contributions in a tax deductible account, its good to conduct even more research to decide if its right for you.