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Flexible Spending Accounts and LASIK

Flexible Spending Accounts and LASIK

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So you’re interested in having LASIK treatment and finally losing the glasses or contacts, but you’re unsure whether you can afford the cost. At up to $2,500 an eye, the expense can certainly be daunting. Fortunately, there are ways to mitigate the financial impact of having this extremely beneficial and minimally invasive surgery performed. Financing plans are available that will allow you to pay the fees over time rather than all upfront, but better yet are flexible spending accounts (FSAs), which allow the patient to pay for the surgery with tax-free dollars.

A flexible spending account is a form of benefit that is sanctioned by the federal government and offered by many employers as part of “cafeteria” benefit plans, which allow employees to choose which of a variety of benefits they would prefer to receive. Prior to the advent of FSAs, medical expenses could only be deducted from income for tax purposes if the patient chose to itemize his or her deductions, a confusing and time-consuming process. Furthermore, the expenses had to reach certain size thresholds to be allowable as itemized deductions. With FSAs, though, patients can estimate the amounts they will spend on qualified medical expenses and set that money aside in special accounts without paying taxes on it. Thus, a person can enjoy the benefits of deducting medical treatment costs without having to go through the complicated itemization process.

To get an idea of how beneficial using an FSA to pay for LASIK can be, think about how much of your paycheck gets taken out in the various income and payroll taxes each pay cycle. Any money you put into an FSA is exempt from those charges, which means that if you put $4,000 in to cover the cost of LASIK, you could avoid paying up to $1,600 in taxes to the federal government, depending on your tax bracket. The net result: your LASIK treatment effectively costs only $2,400, a huge savings.

Of course, a benefit this good has to have a catch or two. In the case of FSAs, understanding the catches is important, but the program remains very useful. Money must be put into the account in advance, before you can pay it out to cover medical expenses. Furthermore, you can only add money into the account at a few designated times each year. The most important thing to understand, though, is that any money put into the FSA must be spent within a set period of time (usually a little more than a year) or lost forever; no money can come out unless it is used to pay valid medical expenses. The nature of any expenditure must be validated with careful documentation or the tax privileges will be lost. This “use it or lose it” characteristic of FSA funds means that taking full advantage of the benefit requires careful planning. You must estimate how much you will spend on qualified treatments and set aside the money at the appropriate time, then follow through and have the treatments performed before the money is permanently taken away.

These factors make LASIK an ideal procedure for payment with FSA funds, largely because of the nature of the treatment. First of all, LASIK is a legitimate medical procedure that addresses a specific medical problem very well, both of which qualifications are necessary for it to be eligible for the FSA program. Furthermore, because LASIK is never performed as an emergency remedy, the timing and cost of the procedure can be planned and calculated well in advance. The sometimes hefty price of LASIK means that the tax savings can add up to significant amounts. Put it all together, and few medical treatments are as compatible with FSA benefits as LASIK is. Other medical expenses that qualify include copayments and deductibles. Cosmetic and “general health” procedures and treatments, though, cannot be paid for with FSA funds, as is also the case with health insurance premiums.

Of course, in order to take advantage of the benefits discussed above, you must first have access to an FSA. If you are interested in having LASIK surgery, be sure to ask your employer whether an FSA benefit is available to you and, if so, when you need to elect to set aside money. If your employer does not currently offer an FSA benefit, you may request that it be added. With the size of the potential savings, it may be worth the wait.

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