Healthcare is a major expense for working Americans of all income levels, and a few smart moves on your part in the next couple of weeks could help you eke out savings that make your medical expenses more affordable. Here's what to focus on.
1. Use up your flexible spending account funds
If you put money into a flexible spending account (FSA) for 2019, you may get the option to carry a certain portion of your balance into 2020 or deplete your plan balance in early 2020. But even with those choices on the table, if you have a lot of money left in your FSA at present, you'll want to make sure to use up the amount you can't carry forward. If you don't, you'll effectively forfeit money.
If you don't have any medical appointments coming in the next few weeks, see if any of your recurring prescriptions are eligible for renewal and pay your copays now to use up your FSA funds. You can also try loading up on supplies that are FSA-eligible, like bandages and sunscreen. And if your eyeglasses could use a refresh (or more importantly, a new prescription), now's a good time to invest in a new pair.
2. Max out your health savings account contribution
The great thing about health savings accounts (HSAs) is that, unlike FSAs, their funds don't expire. In fact, a good way to really benefit from an HSA is to contribute more money than you need for near-term healthcare expenses and carry the rest forward, all the while investing your unused balance for added growth.
But whereas you need to commit to an FSA contribution in advance of the calendar year it applies to, with an HSA, you can change your contributions during the year. As such, if you haven't yet maxed out your 2019 HSA and you have money available to add to it, it pays to get moving.
HSA contributions go in with pre-tax dollars, just like traditional IRAs and 401(k)s, so the more money you put in, the less tax you pay the IRS. For the current year, you can contribute up to $3,500 to an HSA if you're doing so on your own behalf, or up to $7,000 if you're contributing at the family level. But don't delay -- you don't want to miss the opportunity to increase your contribution.
3. Bunch your medical expenses to claim a higher tax deduction
Because the standard deduction is so much higher than it used to be, it makes less sense for taxpayers to itemize on their returns. But it you pay a lot of mortgage interest and state and local tax, and you have a lot of medical expenses relative to your income, then itemizing could make sense for your 2019 return.
You can deduct medical expenses that exceed 10% of your adjusted gross income (AGI). If your AGI for 2019 is $50,000, and you spend $5,200 on medical costs this year, you'll get a $200 deduction.
It could pay to employ a strategy known as bunching your deductions on your tax return, where you cram extra expenses into a single tax year rather than spreading them out as per usual over two tax years (or more). Here's how that might apply to your medical expenses: Let's say you typically undergo an expensive test every January. If you already have a lot of medical expenses this year, moving that test up to December could make sense for tax-filing purposes.
It may not make sense to itemize the following year, as a result, but you'll snag a higher deduction for 2019. In our example, moving up a test that costs you $400 out of pocket so that it's done in 2019 raises your deduction from $200 to $600.
Healthcare may be a burden, but managing it wisely can make it a less stressful spending category for you. Make these important moves before 2019 wraps up so you don't end up losing money you've already set aside for medical purposes or miss the opportunity to shield more of your income from taxes.