American Consequences - August 2021

THE PILL BOX HACK

a prescription or letter of medical necessity from your doctor. The only catch is that you need to have what’s called a Health Care Flexible Spending Arrangement (FSA) with your employer. If you’re not retired and don’t yet have an FSA, you should call your human resources department immediately and open one. These special accounts allow you to save 30% and more on your medical costs. The way they work is simple... Essentially, you have money deducted from your paycheck and placed in a special account. You can contribute as much as $2,750 a year and the money comes out pre- tax. Because it’s pre-tax money, you’re saving whatever percent is your tax rate. You can spend your money on plenty of medical services. For example, this includes: • Acupuncture • Athletic braces • Blood pressure monitors • Compression socks • Contact lenses • Dental exams, dentures, implants • Diabetic test strips • All prescription medications

The IRS publishes a list (IRS Pub. 502) specifying the many medical and dental expenses you can cover with an FSA. Go to www.irs.gov and type “502” in the search box to see the list. The best part is, you can use pre-tax dollars for: • Health insurance premiums • Amounts paid for long-term care • Amounts not covered under another health plan This means almost all of your medical expenses can be paid with pre-tax dollars through your employer’s FSA plan. And by not paying taxes on the money, it’s like getting a great return on your investments without any risk. See below for how it works. With about 10,000 Baby Boomers turning 65 every day, that’s a lot of folks gearing up for retirement... So, find ways to save wherever and whenever you can.

MEDICAL EXPENSES

No FSA Account: Income of $60,000 Tax at 22% Net Income of $52,800 Medical Expenses of $3,000 Net Income = $49,800

With an FSA Account: Income of $60,000 Medical Expenses of $3,000 Tax at 22% Net Income of $57,000 ($60,000-$3,000) Net Income = $50,160

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August 2021

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