In May 2003, the IRS confirmed that laser vision correction qualified as a medical expense. If your medical expenses reach 7.5% of your income in any given year, the price of your LASIK/laser vision correction can be deducted for tax purposes. Most people, however, end up not reaching the 7.5% threshold, therefore, they turn to another popular program: Flexible Spending Accounts.
Your company may offer a FLEX account, and you may not even know about it. A Flexible Spending Account (FSA), (also called flex plan, reimbursement account, Flex 125, Tax Saving Plan, Medical Spending Account, a Section 125, or a Cafeteria Plan), is an employer-sponsored benefit that allows individuals to pay for their eligible medical expenses on a pre-tax basis (there are also similar accounts for dependent and child-care expenses). If you expect to acquire medical expenses that won't be reimbursed by your regular health insurance plan, you may consider taking advantage of your employer's FSA, if one is offered.
A FLEX account allows you to choose an amount to be withheld from each paycheck, and deposited in a special account. You can then use the money in this account to pay for your LASIK.
The advantages of using a FLEX account are that you save automatically,and the money is pre-tax, which means you can save up to over 30%! You must use all the money in your Flex Account before Dec. 31 or you lose the unspent money. You can allocate the expense of LASIK and it would then be deducted from your FLEX account. Ask your Benefits or Human Resource Department for details.
How can I benefit?
FSA saves you money by reducing your income taxes. The contributions you make to a Flexible Spending Account are deducted from your pay BEFORE your Federal, State, or Social Security Taxes are calculated and the contributions are not taxable. The result is that you decrease your taxable income and increase your spendable income. You can save hundreds or even thousands of dollars per year.
How does it work?
At the beginning of the flex spending plan year (which usually starts January 1st), your employer asks you how much money you want to contribute for the year (typically there are limits). You usually have only one opportunity to enroll in a given year, unless there is a qualified "family status change," such as marriage, birth, divorce, or loss of a spouse's insurance coverage. The amount designated for the year is taken out of your paycheck in equal installments each pay period and deposited in a special account by the employer. As medical expenses are incurred, that are not fully covered by your insurance, you submit a copy of the Explanation of Benefits or the provider's invoice and proof of payment to the plan administrator for reimbursement.
What expenses are eligible?
Any expense that is considered a deductible medical expense by the IRS and is not reimbursed through your insurance can be reimbursed through the FSA. These include most elective surgery, LASIK/laser vision correction, deductibles, eyeglasses, and prescription drug co-payments.