3

I understand that medical expenses in excess of 10% of gross income can be deducted with a Schedule A. Can I do this even if I use a medical FSA (excluding the reimbursed part, of course)?

For example, if I have a gross income of $100,000, and $20,000 in medical expenses:

Could I use $5000 FSA and still have $5000 in deductions afterwards? Or must I choose to either use an FSA or make the deductions?

3

You did the math correctly. You don't lose the entire deduction for the sake of the FSA. But it does come off the top, so as you calculated, you still have $5000 to take as an itemized deduction.

  • Thanks for clarifying. I'm trying to make sense of this site: growingfamilybenefits.com/… which implies that there would be a difference between electing an FSA or not... my calculations never showed any difference. – Matthew Nov 5 '14 at 17:44
  • 1
    @Matthew there are differences. 1. FSA avoids social security tax 2.FSA may result in slightly lower social security benefits 3. consider whether FSA reduces the taxable income that you base the 10% threshhold upon. – DavePhD Nov 5 '14 at 17:53
2

You can do both, but you did the math incorrectly. If the 10% threshhold is based upon $100,000 without FSA, the 10% threshhold would be based upon $95,000 with FSA, because the amount you contributed to the FSA is not income for the purpose of calculating the threshhold. In otherwords, line 38 of the 2013 form 1040 (line 2 of schedule A) would be $95,000 instead of $100,000.

10% of $95,000 = $9,500

$15,000 - $9,500 = $5,500

Your total reduction (FSA amount plus itemized deduction) would be $5,000 + 5,500 = $10,500 with the FSA.

  • Thanks for clarifying that. Can you think of any situations in which it would be advantageous to forgo the FSA in this situation? – Matthew Nov 5 '14 at 18:33
  • 1
    @DavePhD - As I read it, the $100K Gross is post FSA, since the FSA comes out first. But your point regarding a lower social security benefit is valid. – JTP - Apologise to Monica Nov 5 '14 at 18:50

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.