Your Money

Your Money Winter Aches and Pains

By Allan Rolnick, CPA

2022 is drawing to a close, and it can’t come soon enough for some folks. (We’re looking at you, Elon, Kanye, and Don.) Winter’s chill is creeping south, ski resorts are opening throughout the north, and turkeys are looking over their shoulders.

This is traditionally a great time of year for taking advantage of various sales: Black Friday, Small Business Saturday, and Cyber Monday. (Taco Tuesday is getting nervous.) Curiously, it’s also a great time to pick up a bargain on prescription sunglasses. Why is that? Are there really enough people getting ready to hit the winter slopes who need to cut the glare? Nope – chalk this one up to a tax code quirk.

Medical and dental expenses have always been “deductible” – but only if you itemize, and only to the extent they total more than 7.5% of your adjusted gross income. That’s not much of a break. The Tax Cuts and Jobs Act of 2017 thinned the ranks of itemizers down to just 14%, and the number with qualifying medical expenses is even lower. That leaves most taxpayers out in the cold at a time when insurance deductibles and overall healthcare costs are climbing fast.

Many employers offer employees something called a Healthcare Flexible Spending Account to help ease the

squeeze. This program lets employees set aside up to $2,850 per year, pretax, for unreimbursed healthcare expenses that would be deductible under Code Section 213(d).

Here’s the quirk: most of these plans require employees to use all of their money by the end of the year. Some of them give you a grace period until March 15. But there’s nothing worse than setting money aside to avoid taxes – then watching it go back to your employer because you couldn’t use it in time. Hence, prescription shades are on sale. (By contrast, more-powerful Health Savings Accounts let taxpayers

with qualifying high-deductible health plans set aside up to $7,300 for 2022 and carry forward as much of that amount for as long as they like.)

The New York Times recently outlined how some clever taxpayers have tried to stretch those accounts. Personal massagers? Uh, no. Reading glasses? Sure. A stress-relieving cruise vacation? Nope. Overkill. A special hypoallergenic washing machine? Maybe, with a “letter of medical necessity.” (If you loved getting a doctor’s note to get out of class back in junior high, you’ll love getting one just as much today, too.)

And how about an emotional support kitten? Yes! That includes the cost of the kitty, plus food and vet bills, but not cat toys or a scratching post. We understand that not everyone likes cats – but who wouldn’t support tax breaks for a tiny little mewling ball of floof?

Most people think that when it comes to paying taxes, April 15 is the biggest deadline of the year. But when it comes to paying less, December 31 is when the real action happens, and flex-spending accounts are just one reason why. Don’t let time run out on you!

A special hypoallergenic washing machine? Maybe, with a “letter of medical necessity.”