Health Savings Accounts And Flexible Spending Arrangements
Cary W. Tucker CFP®
Hearing aids can be expensive. Not only do hearing aids typically cost thousands of dollars, but many health insurance plans, including Medicare, do not provide any coverage for hearing aids at all. Many people forego hearing aids because of the high cost and the unfortunate lack of insurance coverage. Yet, when left untreated, hearing loss can lead to social isolation and a diminished quality of life.
Differences Between Hsa And Fsa Plans
You can only withdraw funds from the HSA that you have previously contributed. On the other hand, once you designate a specific total contribution to your FSA, all the money you signed up to contribute for the year is available to you right away. For example, if you sign up to contribute $200 dollars a month to your FSA, you do not have to wait until five months have gone by before withdrawing $1,000. Rather, the entire sum of $2,400 is available to you at the beginning of the year.
A further difference is that while funds in the HSA can roll over and grow from year to year, the FSA is generally a use-it-or-lose-it plan. The savings in an FSA expire at the end of the plan year and cannot be rolled over entirely from year to year. Depending on the FSA plan offered by your employer, though, not all the unused balance may have to be forfeited at the end of the year. Specifically, the FSA plan can allow for either a carryover or a grace period.
Keep A Check On Your Medical Expenses As You Age
While healthcare costs will continue to rise, during your retirement years, you want to take all the necessary steps to keep your medical bills in check. This includes:
- Preventive healthcare: its important to follow good eating habits, work out regularly, take care of your overall health, and maintain your schedule of annual checkups, immunity shots and vaccines.
- Get ahead of chronic conditions: if you have diabetes, arthritis, or other chronic conditions that may worsen over time, speak to your health care providers for proactive steps to manage the ailment. This may go a long way in preventing sudden, or huge medical expenses later.
- Think of long-term financial assistance: consider insurance policies or funds that cover unexpected medical costs, as these are more likely to occur as you age. Look at financial products for disability insurance, critical illness cover, as well as long-term care insurance.
If your budget does not permit buying an insurance policy or investing in a fixed or variable annuity, check if you qualify for some of the government provided income assistance programs and benefits. If you dont qualify, or need more cash you should consider one of the several borrowing options available to you, including:
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Tax Deductible Medical Expenses In Canada
When tax time comes, the last thing you want to do is miss out on beneficial refunds and credits, either for yourself or your business. When it comes to missed tax savings, medical expenses top the list. A long list of medical expenses are tax-deductible in Canadadepending on how much you paid for your medical expenses, you may be eligible for a refundable tax credit that can make a significant difference in your annual tax bill.
Do People With Hearing Aids Qualify For The Disability Tax Credit Or Earned Income Tax Credit
Two specifictax creditsthe disability tax credit and the earned income tax creditcan both potentially affect individuals with hearing aids. The disability tax credit applies to individuals that are at least 65 years old, retired because of your disability and get taxable disability income. Your hearing loss will need to be severe enough that it bars you from gainful employment. Because of this, you will need a statement from a qualified physician.
The rules for the Earned Income Tax Credit have been firmly established by the IRS. According to its official website, you may qualify for the EITC if you have earned income and adjusted gross income within certain limits AND you meet certain basic rules Because the EITC rules can be rather vague or difficult to interpret, they will need to be reviewed carefully upon filing. As is the case when itemizing tax deductions, anyone hoping to take advantage of the disability tax credit or the earned income tax credit would benefit from speaking with a tax professional.
It is also important to note that hearing expenses related to running a business can also qualify for tax deductions. If for business purposes, you needed to purchase hearing-assistant video conferencing equipment, special telephone accessories, or any other systems to address hearing issues, you may be able to reduce your taxable income.
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What Deductions Are Not Applicable
There are also exceptions to what can be deducted.
- Portions of care paid for by an employer are not tax deductible by the employee
- A purchase for a member of a household only counts as a deductible if that individual is a spouse or a dependent
As with any tax questions, its usually best to see a tax professional, particularly for more complex cases.
Services Related To Medical And Assistive Devices
Supply of service Sch. VI, Part II, s 34
62. A supply of a service of installing, maintaining, restoring, repairing or modifying zero-rated medical and assistive devices described in sections 2 to 32 and 38 to 40 of Part II of Schedule VI is zero-rated, as are any parts that are supplied in conjunction with these services. This relates to services performed on medical and assistive devices that are zero-rated as a result of being specifically listed in sections 2 to 32 and 38 to 40 of Part II of Schedule VI and the parts used when the services are rendered. Zero-rating of a service and related parts under section 34 does not apply in either of the following conditions:
- if the service is an exempt supply under any provision of Part II of Schedule V other than section 9 or
- if the service is related to the provision of a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes.
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Supply Of Prescribed Property Or Service
Sch. VI, Part II, s 31
60. The Governor-in-Council may prescribe by regulation other supplies of property or services relating to medical and assistive devices that would be zero-rated. Currently, no supplies of property or services are prescribed by regulations since all of those previously prescribed are now found in the Act.
Deduct Or Not To Deduct Tax
Firstly, decide whether you will itemize your medical expenses or not. If you are not ready to itemize your deductions, then you will be unable to take advantage of this savings.
However, if you have significant medical expenses, then it is worth for you or your family to do so this year. For the next two years, if you disburse more than 7.5% of your income on medical expenses than you can deduct medical costs from your insurance. Earlier the threshold was 10 years.
Some years, itemizing can make you more sensitive than others. If you have invested in hearing aids and moreover medical expenses, like a hospital stay or surgery where you paid some portion of the cost, this may be the right year for deducting these expenses.
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Donate Your Hearing Aids Tax Deduction Tip
Donate your Hearing Aids Tax Deduction TipHealthy hearing should be enjoyed by all citizens. And for those who require hearing devices, economics shouldnt be a barrier to hearing health. The Hearing Aid Donation Center, a project of Hearing Charities of America, begins the process of recycling hearing aids for those in need.Through the generosity of organizations and institutions throughout the nation, your donated hearing aids will help others enjoy the sounds many of us take for granted.
Hearing Aid Donations
All used hearing aids are acceptedany age, any brand and any model. No matter how old or what brand your hearing aid is, it can be used to help someone in need.
Its as easy as 1, 2, 3
See more information at About the Taxes.The tax benefit is only available for those donors who itemize deductions on their tax returns. Those who take the standard deduction receive no additional tax benefit. Only contributions made during that previous tax year are eligible for tax benefits.
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Medical Expenses And Taxes What Can You Claim
You may claim a tax credit for medical expenses when preparing your income tax return. How much is it worth to you? What qualifies as a medical expense? In my 45 years of doing tax returns, I consider the medical expense credit as the most common tax credit under-claimed by taxpayers, especially the mileage claims, out-of-province travel insurance premiums and assisted living costs for infirm residents. Although this article is quite complex, we hope it is easier to read than the Canada Revenue Agency Income Tax Folio S1-F1-C1 available to you free from the Canada Revenue Agency . I also recommend their publication RC4065, Medical Expenses. See the CRA Folio index for other medical and disability information. If you pay someone to do your tax return based on time, read this article on how to Organize your Medical Receipts to save them time in trying to figure out all of your receipts.
If you have missed claims in past years, you are allowed to amend prior year returns for up to 10 calendar years after the error or omission.
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Details Of Medical Expenses
Acoustic coupler prescription needed.
Air conditioner $1,000 or 50% of the amount paid for the air conditioner, whichever is less, for a person with a severe chronic ailment, disease, or disorder prescription needed.
Air filter, cleaner, or purifier used by a person to cope with or overcome a severe chronic respiratory ailment or a severe chronic immune system disorder prescription needed.
Altered auditory feedback devices for treating a speech disorder prescription needed.
Ambulance service to or from a public or licensed private hospital.
Artificial eye or limb can be claimed without any certification or prescription.
Assisted breathing devices that give air to the lungs under pressure, such as a continuous positive airway pressure machine or mechanical ventilator.
Audible signal devices including large bells, loud ringing bells, single stroke bells, vibrating bells, horns, and visible signals prescription needed.
Baby breathing monitor designed to be attached to an infant to sound an alarm if the infant stops breathing. A medical practitioner must certify in writing that the infant is at risk of sudden infant death syndrome prescription needed.
Bathroom aids to help a person get in or out of a bathtub or shower or to get on or off a toilet prescription needed.
Bone conduction receiver can be claimed without any certification or prescription.
Breast prosthesis because of a mastectomy prescription needed.
Grace Periods And Carryovers
With a carryover, up to $500 of unused FSA funds from the previous plan year can be carried over and used to pay for qualified medical expenses in the following plan year.
With a grace period, any unused FSA funds from the previous plan year can be used to pay for qualified medical expenses incurred during a period up to two and a half months after the end of that year. After the grace period, any remaining FSA funds from the previous year expire completely.*
Moreover, if your employer FSA plan includes a grace period, you may be able to pay for hearing aids by drawing from two years of FSA contributions.
Supposed that, assuming your FSA plan has a two-month grace period:
- Your FSA plan year ends in December after you signed up to contribute $2,400 to your FSA for the year.
- However, you have only withdrawn $400 in health expenses and have $2,000 left in your FSA at the end of the year.
- In the following year, you again designate a total FSA contribution of $2,400 at $200 a month.
- In mid-January, you make an appointment with your audiologist to obtain a new audiogram and order two new hearing aids for $4,400.
- Even though you may have only contributed $200 to the FSA for the year so far, you can immediately withdraw up to the full $2,400 annual contribution amount.
- Moreover, since you are still within the grace period, you can also draw on the $2,000 balance remaining in your FSA from last year.
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Medical Expenses In Canada: Breaking Down The Costs
Canadian healthcare cost inflation continues to rise rapidly with each passing year. While newer data isnt available yet, between 2004 and 2014, medical expenses rose by 54%, significantly higher than housing , clothing and food . However, in Canada, public healthcare covers only about 70% of the total medical expenses, while the remaining is split between private insurance and self-contribution. A recent report shows that those without private coverage spend over $5,000 per year on out-of-pocket medical expenses. This may include:
With steep healthcare bills, many Canadians choose to cash in their retirement savings early or rely on financial support from their children or extended family. In fact, a 2016 Sunlife Canadian Health Index suggests that half the surveyed Canadians experienced one or more serious health issues, and 42% of them suffered some degree of financial hardship.
Are Any Of The Fees Related To Hearing Aids Tax Deductible
Some costs related to hearing aids can be claimed as medical fees. For example:
- Purchase, rental and maintenance fees for hearing aids and the cost of batteries
- Purchase fees for a closed-captioning signal decoder that transcribes the script and sounds of a TV show and displays them on the screen
For more information on the tax deductions available to people with hearing loss, please contact a Revenu Québec or Canada Revenue office.
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Things To Keep In Mind While Considering Hearing Aids As A Tax Deduction
Many of us, doing taxes can be confusing. Here are a few tips:
- While itemizing your taxes, use Form 1040 Schedule A Itemized Deductions.
- The IRS provides us with the Interactive Tax Assistant online tool to help you out what expenses are deductible.
- Most importantly remember to keep all your receipts!
Can I Get Tax Deduction On Hearing Aid
Yes, hearing aids are tax-deductible. According to the Internal Revenue Service, the taxpayers can deduct various kinds of medical expenses. It includes hearing aid also. Turbo tax, a popular tax preparation software, also ensure that hearing aids are tax-deductible. Even the hearing aid batteries are tax-deductible.
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According to IRS, in addition to the price of hearing aid one can deduct for the doctors visit, hearing test, repairing of hearing aid are also tax-deductible. You may also receive a tax deduction when you donate your old hearing aids to a qualified organization.
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How To Deduct The Entire Cost Of Your Hearing Aids
So rather than worrying about AGI thresholds and standard deduction values, wouldnt it be nice if you could simply deduct the entire cost of hearing aids? You do have a few options in that regard. Depending on your situation, you may be able to pay for hearing aids using a Health Savings Account or a Flexible Spending Arrangement .
With both the HSA and FSA, there is no deduction threshold. All the cash contributed to the HSA or FSA reduces your taxable income . HSA or FSA funds can then be used to pay for qualified medical expenses such as hearing aids and hearing aid batteries. Be warned, though. If you take distributions from your HSA or FSA for anything other than qualified health expenses, you may be subject to tax penalties.
Can I Deduct Hearing Aid Accessories
Can I deduct the expenses for a remote microphone and associated hardware that work with my hearing aids? They’re necessary for understanding speech in certain situations. Also, can I deduct the cost of the hardware for listening to TV wirelessly through the aids? These two expenses are not listed in Pub 502, but there is a mention of TV captioning devices.
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Supplies Related To Medical And Assistive Devices
Parts, accessories or attachments Sch. VI, Part II, s 32
61. A supply of a part, accessory or attachment that is specially designed for medical and assistive devices listed in Part II of Schedule VI is zero-rated. Two examples are outlined below:
Example – dialysis machine supplies
Dialysis machine supplies: Dialysis machines that can be used in an individual’s residence are zero-rated under section 5.2 of Part II of Schedule VI. Certain parts, accessories and attachments are specially designed for these machines, including a cartridge or cassette type membrane to permit the blood cleaning process.
Example – intravenous supplies
Intravenous supplies: An intravenous apparatus that can be used in an individual’s residence is also zero-rated under section 5.2 of Part II of Schedule VI . Certain parts, accessories and attachments are specially designed for such apparatus which is essentially a mix of reusable and single use components that, if sold together, form an intravenous apparatus. However, in many cases, they are sold separately. Separate parts of an apparatus, such as a stand, are used repeatedly and are not usually supplied separately. Other components of the apparatus such as the bag, set and start kit are disposable, and therefore supplied more frequently. However, in either case, if the supply of a part, accessory or attachment meets the specially designed criterion of section 32 of Part II of Schedule VI, it is also zero-rated.