As part of the Affordable Care Act (called “ACA” and also referred to as Obamacare or the Health Care Act), the threshold for climbing medical expenses on your federal income tax return changed. That means that for 2014 and beyond (it also applied last year), the threshold for claiming medical expenses is 10% of adjusted gross income (AGI) as compared to 7.5% of AGI in 2012 (there’s an exception for those over the age of 65 – those folks get to keep the 7.5% threshold for a few more years).
Practically, this means that fewer taxpayers will be claiming medical expenses on a tax return. That's because, in addition to the requirement that you itemize your deductions, your qualifying medical expenses must exceed 10% of your AGI before you can claim the first dollar: the higher the AGI, the higher the threshold.
Here’s a quick example: Let’s say your AGI is $50,000. That means you must have at least $5,000 in qualifying medical expenses before you can claim any medical deductions. In that example, if you have $3,400 in expenses, you can’t take the deduction since $5,000 – $3,400 0. If you have $5,000 in expenses, your deduction is still 0 since $5,000 – $5,000 = 0. However, if you have $7,500 in expenses, your deduction is $2,500 ($7,500 – $5,000 = $2,500).
Even though the deduction is not available to as many taxpayers, health care expenses haven't decreased for most families. So how can you keep out of pocket costs low? Consider a Flexible Spending Account (FSA).
An FSA is a tax-free account that you can use to pay co-payments, deductibles, prescription meds and other medical expenses.
Here's how it works: You and/or your employer can contribute up to $2,500 of pre-tax dollars each year (note that this is also a change since FSA amounts were not always capped). That money remains tax-free so long as you use it only to pay for qualifying medical expenses.
Medical expenses generally include medicines obtained by prescription, including over-the-counter medicines obtained by prescription. They also include insulin - even over-the-counter insulin (this is a specific exception).
Medical expenses don't include insurance premiums. And, as with tax deductible medical expenses, over-the-counter medicines like Advil or Tylenol are not deductible unless prescribed by a doctor. This a bit different from the law a few years back: as of January 1, 2011, over the counter medicines are not eligible for under an FSA unless prescribed by a doctor. This includes personal care items, including those that might have a medical purpose, like medicated shampoo, skin lotions or condoms, which are not deductible without a prescription.
An FSA is a spend it or lose it account: you lose any money left in the account at the end of the year or grace period, if applicable so plan wisely (it's worth noting that, as of October 2013, there is a limited carryover allowable).
And that brings us to our next giveaway! Over the counter personal items aren't deductible - so why not pick up a few for free? Although not the typical back to school item on the list, Carmex Moisture Plus will make sure smiles stay healthy, happy and year book ready! Three readers will receive a small kit of Carmex items which includes a locker mirror, the four current super cute, fashion designs and a personal note from Carmex!
The new trendy designs allow students to match their favorite pattern with notebooks, pencil cases, etc., while also expressing their personal style.
To enter to win, just answer this question: What's one thing you always pick up at the drug store in fall? I'll go first: It's cold and flu season so I buy tissues.
Entries must be posted in the comments section for this blog post in the space below by 10:00 p.m. EST on October 2, 2014. It's just that easy. I’ll choose three winners randomly (using a number generator) out of all of the qualifying entries.
Be sure and read the fine print for more rules because, as you know, I’m a lawyer and I like rules:
Don’t panic if your comment doesn’t show immediately. If it goes to moderation because, for example, you’re new here, the time stamp on your comment is what counts. If you have difficulty registering, please send an email to blogadmin@forbes.com and copy me (tech@taxgirl.com) so that I can help if I need to/can.
I love my
Twitter followers and my Facebook fans but for this particular giveaway, tweets and Facebook comments will not be counted. Ditto for emails. You must leave your comment on the blog at this post.You can enter as many times as you like but you must leave a different answer each time you comment.
Offensive comments or comments that otherwise violate the comment policy will be deleted and will not be considered valid for purposes of the contest. Similarly, pingbacks and other links will be disregarded for purposes of the contest.
I will need your full name and your email address: be sure to use your real information when you register to leave a comment. I won’t publish your email address but I do need contact information for the winning entry. If you win and I can't reach you, it's a forfeit.
Due to shipping considerations, you must have a valid United States address. Sorry, Canada, eh?
I respect your privacy and I will not send you anything unrelated to your entry in this contest. By entering the contest, you agree that I may post any part or all of your submission including your name as a part of the contest announcements or promotions, with the exception of your email address.
Like Judge Judy, my determination is final.
Prizes are provided directly by our sponsors and are not exchangeable or redeemable for other prizes. Sponsors do not pay for placement and do not receive any compensation for contributions – neither do I! I have no affiliation, paid or otherwise, with any of our sponsors.
If you aren't allowed to participate in giveaways because of the laws in your state or your age or an agreement you've made with your mother, consider this giveaway not applicable to you. In other words: void where prohibited or restricted.
Finally, the giveaway is about me, me, me. It’s not affiliated with or endorsed by Forbes. So leave them out of it, okay?
Comment away! And thanks for participating in Back To School 2014!
