Wednesday, November 19, 2008

The joy of flex accounts

Old fashion flex account

I feel kind of old today. Well, maybe not old, but responsible and grown up.

I've spent the last two hours researching my companies flex reimbursement benefits and tax laws and deductions, trying to decide if I should enroll again next year. If you're not familiar with flex reimbursement, it's basically money taken out of your paycheck before taxes and put into an account. You may then tap into this account for approved medical expenses and such that would normally be tax deductible, except instead of having to wait till the end of the year and deducting them, you just get reimbursed for it from a non-taxed account. The trick is that if you don't use the money in the account at the end of the year, you lose it. I don't know if it goes to the company holding the account or the IRS or whomever; it doesn't really matter who's hands it ends up in because it's not in my hands and that's what I care about.

This year I've put aside $20 per paycheck leaving me with about $260 in my account. I've only used $110 on new glasses. That means I've got $150 left that I need to use by the end of the year. Talking to a coworker he mentioned that it can be used for things like aspirin and vitamins as well, not just copays. I called the company to verify this and the nice lady on the phone verified that, yes, vitamins and aspirin and such are indeed covered. What this means is that when I get off work today I'm going to go home, change, then go to Walmart and buy $150 worth of Vitamin C, D, E, and any other letter of the alphabet that has the word "vitamin" in front of it.

I imagine I'll have a pretty stocked medicine cabinet for awhile.

I don't think I'll put any aside next year. While I understand the purpose of the flex accounts, it just doesn't make sense for me to use it. I looked up the tax deductions for 2008 and singles can claim $5,450 in standard deductions (couples get $10,900 if filing jointly) - that means I can say I had up to $5,450 tax deductible expenses without needing to itemize and provide receipts. This is quite beneficial for me since I don't usually get receipts for gas (commuting to work: about $500 so far this year) but I can still get it deducted. Save for severe medical trauma within the next 6 weeks, there's no way my deductions
will total more than $5,450 and as

This many pills, times 100

such I can claim standard deduction to get back anything I would have been reimbursed for on my flex account. Sure I need to wait to the end of the year to get the tax credit, but it also doesn't force me to buy 2,700 Vitamin C supplements at one time. It's a trade off, really.

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