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Author: PosNetWorth Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121144  
Subject: Flexible Spending/Medical Expenses Date: 11/2/2003 6:02 PM
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I have higher-than-ordinary medical expenses, and I figured some experts here could help me figure out how to pay as many of them as possible from pretax dollars. My husband is a W-2 employee in a pretty high (28%) tax bracket, I have no earned income at this time. We're in a state with high income taxes as well (8.5% marginal), so every deduction counts!

Here are my questions, o wise ones:

* My husband's employer offers a flexible spending account, which we do use to our best advantage. They have a maximum amount that you may set aside -- it's a little less than 2% of DH's salary. Is limiting this contribution standard/allowed?

* Does that flexible spending 2% count towards the 7.5% floor for deductions on the tax return, or do you need to hit the 7.5% floor separately? (Hmm, if it's the former, can I file an amended return for 1999 and get my extra moolah back?)

* What is the mileage rate for medical mileage now? I see specialists with 300 and 550 mile round-trips. With the latter, would overnight accommodations reasonably be covered?


Mostly, I wish I could put more in flexible spending -- I think hitting the 7.5% floor would be pretty insane... Without that %%^& maximum we could have saved $2K more in taxes this year.

-- Laura
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67406 of 121144
Subject: Re: Flexible Spending/Medical Expenses Date: 11/2/2003 7:00 PM
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I have higher-than-ordinary medical expenses, and I figured some experts here could help me figure out how to pay as many of them as possible from pretax dollars. My husband is a W-2 employee in a pretty high (28%) tax bracket, I have no earned income at this time. We're in a state with high income taxes as well (8.5% marginal), so every deduction counts!

Here are my questions, o wise ones:

* My husband's employer offers a flexible spending account, which we do use to our best advantage. They have a maximum amount that you may set aside -- it's a little less than 2% of DH's salary. Is limiting this contribution standard/allowed?


Yes, most plans have an absolute dollar limit, not a percentage limit.

* Does that flexible spending 2% count towards the 7.5% floor for deductions on the tax return, or do you need to hit the 7.5% floor separately? (Hmm, if it's the former, can I file an amended return for 1999 and get my extra moolah back?)

Expenses which are paid with FSA dollars do not count towards meeting the 7.5% threshhold.

* What is the mileage rate for medical mileage now? I see specialists with 300 and 550 mile round-trips. With the latter, would overnight accommodations reasonably be covered?

$.12/mile in 2003. Under certain circumstances, the cost of overnight accommodations up to $50/person/night can be included in deductible medical expenses. See IRS Pub. 502, Medical and Dental Expenses, for further information. www.irs.gov/pub/irs-pdf/p502.pdf

Mostly, I wish I could put more in flexible spending -- I think hitting the 7.5% floor would be pretty insane... Without that %%^& maximum we could have saved $2K more in taxes this year.

If you don't like the current tax law, write to your Congresspeople and complain.

Ira

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Author: PosNetWorth Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67417 of 121144
Subject: Re: Flexible Spending/Medical Expenses Date: 11/3/2003 5:28 PM
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Ira --

Thanks for your helpful responses. I am assuming, until someone yells that I am wrong, that the flexible spending amount limit is determined solely by the employer? I suppose that makes sense, since they're the ones who take the risks dispersing the money before it has been deposited.

If you don't like the current tax law, write to your Congresspeople and complain.

There are much bigger tax issues (in my state) on referendums on election day tomorrow; changing the entire tax code is one of my lower priorities. No, I don't like the current tax law, but I certainly haven't come up with anything better on my own. My main complaint is actually how difficult it is to understand.

And one thing I don't understand, to tell the truth, is why what constitutes "reasonable" medical expenses before you get to deduct them is indexed to income. Most people I know can pay every penny of their medical expenses out of a flexible spending account, and then wonder how to spend the rest at the end of the year. I'll have about $8K in post-tax medical bills, after flexible spending... Ick!

Complaining because we have to pay tax, though, is kind of a strange thing -- we're whining because we had income! Aargh! Better that than the opposite, anyway.

-- Laura

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Author: adams314 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67439 of 121144
Subject: Re: Flexible Spending/Medical Expenses Date: 11/5/2003 12:57 PM
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I'm in a similar situation, my wife has incurred large expenses this year, I have almost none (and no FSA). I make considerably more than her (3-4x). I think her expenses may exceed 7.5% of her income if considered separately. I was planning to run the numbers both ways (filing jointly v. separately) at the end of the year and see how it pans out. Am I deluding myself? I imagine there is a fairly high level of expenses required to outwiegh the effect of her deduction on my income.

As an aside, the expenses are mostly related to pre-natal care for a baby which is due the first week of January. If we file separately, do we get to choose who would get the extra deduction for the child? More importantly, does anyone know of a sure fire way to get this baby out before Jan 1 ;) ??

thanks,
larry

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67440 of 121144
Subject: Re: Flexible Spending/Medical Expenses Date: 11/5/2003 1:02 PM
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I'm in a similar situation, my wife has incurred large expenses this year, I have almost none (and no FSA). I make considerably more than her (3-4x). I think her expenses may exceed 7.5% of her income if considered separately. I was planning to run the numbers both ways (filing jointly v. separately) at the end of the year and see how it pans out. Am I deluding myself? I imagine there is a fairly high level of expenses required to outwiegh the effect of her deduction on my income.

Work the numbers both ways. Remember, there are restrictions on certain adjustments that apply to filing MFS.

As an aside, the expenses are mostly related to pre-natal care for a baby which is due the first week of January. If we file separately, do we get to choose who would get the extra deduction for the child? More importantly, does anyone know of a sure fire way to get this baby out before Jan 1 ;) ??

No one gets the exemption (not a deduction) if the child isn't born in 2003. If the child is born in 2003 and you file MFS, you can choose who gets the exemption. The only sure fire way to get the baby out before Jan 1 is a scheduled caesarian delivery.

Ira

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Author: FlyingDiver Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67442 of 121144
Subject: Re: Flexible Spending/Medical Expenses Date: 11/5/2003 5:21 PM
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The only sure fire way to get the baby out before Jan 1 is a scheduled caesarian delivery.

Well, scheduled induced labor is probably 99% sure, as long as the mother doesn't have a reaction to whatever they use to induce. I think it's some sort of hormone mix. And I'm sure that's a lot less risk than the surgery.

joe


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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67446 of 121144
Subject: Re: Flexible Spending/Medical Expenses Date: 11/5/2003 5:43 PM
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Well, scheduled induced labor is probably 99% sure,

It's sure to have a baby but it could end up being casearean. Labor isn't exactly like a widget production line. Having been induced a couple of weeks late, I wouldn't recommend this - even for a tax deduction. You really don't want to see the mother's "reaction."

rad

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Author: dougdoogle Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67450 of 121144
Subject: Re: Flexible Spending/Medical Expenses Date: 11/6/2003 10:29 AM
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>>> More importantly, does anyone know of a sure fire way to get this baby out before Jan 1 ;) ?? <<<

A safe non-medical way of inducing labor is to be in the middle of remodeling the nursery. Stepladders, spackling, and wallpaper samples worked for us.

Doug

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Author: vickifool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67695 of 121144
Subject: Re: Flexible Spending/Medical Expenses Date: 11/23/2003 11:48 AM
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Well, scheduled induced labor is probably 99% sure, as long as the mother doesn't have a reaction to whatever they use to induce. I think it's some sort of hormone mix. And I'm sure that's a lot less risk than the surgery.

joe


As someone who has actually experienced both an induced labor and a natural labor, I sure don't recommend it. It's a lot harder than the labor from waiting until the baby is ready. It's also more dangerous to both mother and baby.

But Joe is right that surgery is probably more dangerous still. Not to mention that she will be recovering from the surgery for six weeks (minimum--some parts take a whole year) and you will have to do the baby care.

Increased medical costs are likely to offset any tax savings.

Vickifool -- flabergasted

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