The majority of people with hearing loss in America are under retirement age and working; some people in need of hearing aids might be sitting on the side-lines hoping for the hearing aid tax credit bill to pass (www.hearingaidtaxcredit.org) which permits tax credits (which is better than a deduction) up to $1,000 for a pair of hearing aids. But many people are not aware that they could already get this tax credit if they participate in their company's medical flexible spending account program (FSA). Here's how it works....
To address the increasing health care costs the federal government enacted legislation which permits employers to provide their employees with the opportunity to establish Flexible Spending Accounts (FSA's) that reduce their taxable income and apply the money saved to help off-set their medical expenditures.
In other words, the medical portion of an FSA permits employees through payroll deduction to set aside up to $5,000 pay per year, on a pre-taxed basis to pay for out-of-pocket medical and dental expenses for themselves and or family members. Basically, all expenses not covered under a group insurance plan are considered covered expenses and can be utilized with this program. These would include expenses such as glasses and hearing aids.
So if your company offers such a program and you are considering the purchase of hearing aids you could pay it off bi-weekly through pre-taxed payroll deductions. Many times the upfront expense such as hearing aids is reimbursed in advance, as you continue to pay them off with your bi-weekly deductions during the year.
So let's assume you are planning on buying hearing aids next year at a cost of $4,000 and you know you will have an additional $1,000 in medical expense deductions. If you are on bi-weekly payroll then you would have your human resource department deduct $192.30 per paycheck into your FSA account. Then when you purchase your hearing aids, simply submit the claim with a receipt for the hearing aids.
This could result in significant savings to you. Assume someone is in the 15% tax bracket. The savings on the hearing aids (since they were purchased at a pre-tax level) would be $600, and if you are in a 30% tax bracket your savings would be $1,200. When the hearing aid tax credit bill is passed and you pay income tax, then you would not only get the hearing aids at a pre-tax level but you would also get an additional $1,000 per hearing aid pair as a credit against your taxes.
So if you are working American and your company offers flexible spending accounts consider the cost savings available to you now when buying hearing aids through FSA participation.