ADHD is a medical diagnosis. You are bound to have health bills throughout the year to pay for your treatment. There are health insurance premiums, co-payments for doctors visits and prescriptions, therapy sessions and more. Depending on your insurance plan, you may benefit from having either a Flexible Spending Account or a Health Savings Account to help you pay your bills and save on your taxes.
Flexible Spending Accounts
Flexible Spending Accounts (FSA) can be used for a number of different expenses, such as dependent care, but the most common are those set up for health related expenses. FSAs are set up through employers and because deposits made into these accounts are not subject to payroll taxes, they can save you money.
Money placed into an FSA can be used to pay deductibles, copayments and coinsurance as well as expenses not covered by insurance, such as dental costs, cosmetic surgery, or items purchased to improve overall health. Any expenses must be used to treat or prevent a specific medical condition. This can mean supplies to help manage diabetes or the cost of bandages to treat cuts. Normally, expenses allowed under the Internal Revenue Service (IRS) as a medical tax deduction are allowable expenses for an FSA .
The IRS does not place any limits on how much money can be placed in an FSA but some employers will place a cap on the amount an individual employee can contribute. Usually, the employee will receive a debit card to use for qualified expenses. If no debit card is used, employees will need to submit receipts and be reimbursed for any money spent.
Funds placed into an FSA cannot be rolled over and any funds not used by the end of the year are forfeited.
Health Savings Account
Health Savings Accounts (HSA) are available to those individuals enrolled in a high deductible ($1,000 or higher annual deductible) health insurance plan. Unlike FSAs, any money deposited into an HSA is rolled over, will accumulate from year to year and are owned by the individual. Money deposited into the HSA are not subject to federal income taxes, unless withdrawn and used for non-medical expenses.
The U.S. government does place limits on how much can be deposited into an HSA in any given year. These amounts may change from year to year, so it is important to check current limitations.
Money in an HSA can be used for medical deductibles, copayments, dental or vision care, chiropractic care, medical equipment, eyeglasses, hearing aids, transportation costs and other medically related expenses.
Depending on the HSA, the individual may be given a debit card to use for expenses, may be issued checks or may need to submit receipts for reimbursement.
Differences Between FSA and HSA
One of the main differences between a Flexible Spending Account and a Health Savings Account is that money deposited in an FSA must be used by the end of the year or it is forfeited back to the employer. (For those people with FSAs, it is a good idea to check your balance toward the end of the year. Because money can be used for non-prescription items, if there is money in the account, it would be a good time to stock up on cold/flu medications, go to the dentist or purchase new eyeglasses.) Deposits made to a HSA belong to the individual and roll over from year to year and continue to accumulate.