Recent reports have estimated that the average family of four will spend roughly $30,000 on healthcare—even when on an employer-sponsored plan in 2022. This is nearly a $5,000 increase on the 2020 healthcare expense numbers, and these rising costs show no sign of stopping. For families facing high medical bills, following some simple tax advice can help keep more money in your pocket.
Tax Advice for Medical Expenses
You’re already spending a lot on healthcare. So you don’t want to risk making any mistakes that would cause you to owe more on your tax return. These tax filing tips for medical expenses can help you lower your liability.
1. Make Regular HSA Contributions
If your health plan qualifies as having a “high deductible,” then opening a health savings account (HSA) would allow you to reduce your taxable income and set aside funds to help cover your family’s medical bills.
Whether you or a loved one is living with a chronic health issue, or you just want to plan ahead and save for your regular checkups or any acute care needs, making contributions to an HSA can be a great strategy to help organize your budget.
2. Use Your Flexible Savings Account (FSA)
You can gain some additional tax savings if your employer has set up an FSA. These accounts let you make pre-tax payroll contributions, and then you can use those tax-free funds for qualified medical expenses down the road. The catch though, is that you’ll need to use your FSA dollars by the end of the year. Otherwise, you’ll lose the funds.
3. Remember Your Self-Employed Deductions
Individuals who are self-employed should deduct the total amount of their annual health insurance premiums whenever their business shows a profit for the tax year. Then you’ll be able to utilize this deduction as an “above-the-line” deduction, meaning it can reduce the taxable income even for taxpayers who are claiming the standard deduction on their return.
4. Consider Itemized Deductions
If you’re going the route of an itemized deduction, the IRS will allow you to include medical expenses for the 2022 tax year if the total amount exceeds 7.5 percent of your adjusted gross income. Again, this is only for itemized deductions. If you’re planning to use the standard deduction but also had high medical expenses for the year, switching to an itemized return could be a better course of action!
Ready to Discuss Your Options?
NSO & Company helps individuals and families throughout the state of Indiana—and even across the country—monitor their tax liability. Let our team help ensure that you’re able to secure all of the tax savings you’re owed!
A tax planning strategy session will allow us to review your annual medical expenses against your taxable income. The sooner we can talk, the better. We want to look ahead for additional savings in the coming year. But more importantly, we want to confirm that you aren’t missing any of the benefits when you get ready to file this year’s tax return. Call us today to schedule your consultation: (317) 588-3131.