In 2015, the Health Care Spending Account allows you to deposit up to $2,500 annually per employee into a tax-free account to be used for eligible healthcare expenses. In 2016, the maximum amount that may be contributed is $2,550 per year.
The Health Care Spending Account may be used to pay for any expenses connected with health/dental care for you, your spouse, or any eligible dependent as defined by the IRS. This program is not available for the reimbursement of expenses for a domestic partner who is not a qualified tax dependent. Expenses for children who graduate may continue to be submitted through December 31, if those children will be claimed as a tax dependent.
Advantages of participation
Total tax avoidance for FICA, Federal, and State taxes.
Medical expenses are tax deductible only if they are over 10% of your adjusted gross income (AGI). A medical spending account allows you to use tax-free money for medical expenses below 10% of your AGI.
If you deposit as little as $600 in a medical spending account, you save whatever the Federal and State taxes are for your income level, and you also save approximately $46 on FICA taxes.
- To be eligible for reimbursement, expenses must be incurred by December 31 of the year in which funds are contributed to the spending account.
- You have until the final working day in April of the following year to file reimbursement requests with the Benefits Office for services received in the year of the spending account.
- Any funds pledged to a spending account, for which eligible expenses are not incurred by December 31, will be forfeited. This program is not a “Medical Spending Account” program where a balance can be carried over.
- If money is requested for the purchase of a product which is subsequently returned, or the order for the product is cancelled, then the money received by the employee must be returned to the University to be credited to the employee’s Flexible Spending Account. The funds may be used for other appropriate purposes for that year. Failure to return funds to the University in these situations is a violation of University policies and IRS regulations. Abuse of the Flexible Spending Account program will result in disciplinary action against the employee including possible termination, reporting of taxable income to the IRS and/or criminal charges for theft.
- If you terminate employment during the year, expenses must be incurred by the last day of the month in which you terminate.
- Deposits to the health care spending account may reduce your Social Security wage base, and consequently, your Social Security tax contributions may be slightly reduced.