subject: How To Save 40% on Orthodontic Treatment [print this page] How To Save 40% on Orthodontic Treatment
FSAs let you to pay for orthodontics with pre-tax dollars. Pre-tax means you save 25%-28% in federal taxes, about 5% in state taxes, 7.65% in FICA taxes (if income is less than $107,000) ... these add up to nearly 40%! So with an FSA, a $5,000 orthodontic treatment costs just over $3,000. Granted, you still must pay $5,000, but at tax time you save nearly $2,000 through the FSA.
How exactly does the FSA work? If your employer offers an FSA, simply declare in a form an amount to be deducted from each pay check - say, $417 per month for a $5,000 treatment. To spend the amount in your FSA, just start treatment and submit the bill/receipt to employer for refund. That's it! When your employer issues the W-2 in the following year, your income will be $5,000 lower and you won't have to pay taxes on that, saving about $2,000, without any extra IRS forms.
Note, your orthodontist has nothing to do with this FSA. You still would pay him or her the quoted price. Whether you pay upfront or financed, the flexibility is yours and the FSA is compatible both ways. Indeed, even if you finance, you can submit the full charge being financed to your employer for refund.
A few clarifying points:
- You must declare the FSA amount in advance (ask employer for deadlines), and the amount is use-it-or-lose it. Unused amounts do not carry over to the next year. Accordingly, before declaring the amount, do obtain a firm estimate of the cost from your orthodontist, as a basis for declaring your FSA deduction.
- Employers set a maximum FSA amount per year, typically at most $5,000. Starting in 2013, the IRS will limit it to $2,500 per person per year. If these limits seem problematic, they need not be. If your spouse also can opt for an FSA, this FSA may be used to pay for your treatment. If your spouse also wishes treatment, fine, the following year you switch roles and devote both your FSAs to your spouse. The tax savings are the same, basically. Use your creativity!
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