Are you considering orthodontic treatment like Invisalign or braces? Here are some ways to make it more affordable using Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs).
Flexible Spending Accounts (FSAs)
Using a Flexible Spending Account (FSA) can help you save money on orthodontic treatments. FSAs offer several tax advantages:
Contribution Limit for 2024:
Up to $3,050 per year per employer.
If both you and your spouse have FSAs, you can each contribute up to the maximum amount.
Tax Benefits of FSAs:
Pre-Tax Contributions: Contributions are made on a pre-tax basis, reducing your taxable income and saving you money on federal income taxes, Social Security taxes, and Medicare taxes.
Tax-Free Withdrawals: Funds used for orthodontic treatment are not subject to federal income tax, meaning you can use 100% of your contributions.
Payroll Tax Savings: Contributions reduce your taxable income, which also lowers your Social Security and Medicare taxes.
Example of FSA Savings: For someone with an annual income of $75,000 using an FSA to pay for an $8,000 orthodontic treatment:
Federal Income Tax Savings: 22% of $3,050 = $671
FICA Savings: 7.65% of $3,050 = $233.33
Total Tax Savings: $671 + $233.33 = $904.33
Net Cost of Treatment: $8,000 – $904.33 = $7,095.67
Using Your FSA:
Enroll: Opt into the FSA during your employer’s open enrollment period.
Contribute: Contributions are deducted from your paycheck pre-tax.
Pay for Treatment: Use your FSA debit card or submit claims for reimbursement with receipts.
Health Savings Accounts (HSAs)
An HSA is another excellent option if you have a high-deductible health plan (HDHP). HSAs also offer significant tax benefits:
Contribution Limits for 2024:
Individual Coverage: $4,150
Family Coverage: $8,300
Catch-Up Contributions (for those 55+): $1,000
Tax Benefits of HSAs:
Pre-Tax Contributions: Reduce your taxable income.
Tax-Free Earnings: Interest and investments grow tax-free.
Tax-Free Withdrawals: For qualified medical expenses.
Example of HSA Savings: For someone with an annual income of $75,000 using an HSA to pay for an $8,000 orthodontic treatment:
Federal Income Tax Savings: 22% of $8,300 = $1,826
FICA Savings: 7.65% of $8,300 = $635.95
Total Tax Savings: $1,826 + $635.95 = $2,461.95
Net Cost of Treatment: $8,000 – $2,461.95 = $5,538.05
Using Your HSA:
Enroll in HDHP: Ensure your health plan qualifies.
Set Up HSA: Through your employer or a financial institution.
Contribute: Via payroll deductions or direct contributions.
Pay for Treatment: Use your HSA debit card or reimburse yourself with receipts.
Tips for Using HSA or FSA for Orthodontic Treatment:
Check Eligible Expenses: Verify that orthodontic treatments are covered.
Estimate Costs: Plan contributions based on your treatment needs.
Keep Receipts: Maintain records for reimbursement and tax purposes.
By leveraging FSAs and HSAs, you can significantly reduce the cost of orthodontic treatment, making it more affordable and manageable. Start planning today to take advantage of these tax savings!
Ready to begin your orthodontic journey? Contact us today for a consultation and we’re here to help you make your braces or Invisalign fun and affordable!
Visit us at Porter Ranch Orthodontists for personalized orthodontic care. We listen to our clients and provide the best possible treatment to give you the smile you deserve. Book your appointment today!