I have had Aetna for more than 10 years. I had two different
types of re-imbursement accounts. Each type of account had a
limit on the amount. My recollection is that my account had
a $5,000 limit. For purposs of the discussion assume that
the limit is $5,000 and the total amount you will incur is
$11,000. The first type pays the medical expense only after
you have contibuted the money. For example, if you have
$96.15 ($5,000 / 52 weeks) a week withheld from your
paycheck then $95.15 a week is reimbursed to you when you
send the documentation in. The second type of account
reimburse the entire amount $5,000 at the front end provided
you will contribute that amount during the year. The second
method is obviously a better method since you get the cash
faster.

Keep in mind that you can also reduce the amount of state
and federal taxes witheld from your paycheck to cover the
amount the remaining $6,000 will reduce your taxes owed for
the year. This is done by increasing your exemptions. I
would not keep the witholding the same and then get a big
refund for the year. For example assume that taking the
excess medical deduction decreases your federal taxes by
$260. You could increase your exemptions to give you another
$5 a week.

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Peter wrote:

- quote -

The only downside of increasing contributions to
a medical flexible spending account -- other than
it being forfeit if you DON'T use it for medical
expenses -- is that it reduces Social Security
earnings, which may reduce your ultimate
Social Security benefit.

Except in unusual situations, you're better off having
expenses removed from gross income (such as by this
account) than being deducted as an itemized deduction.

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"Peter" <PET1n[at]yahoo.com> wrote:

- quote -

The more you can do in pretax the better, because whatever
you have to put on sch a you are automatically going to lose
the 7.5% right off the top.

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My job offers a special medical expense account where they
take money out of my paycheck BEFORE taxes and I can use
that money for almost any of my medical expenses.

I have to have major surgery which will cost me about
$10,000 in out of pocket medical exp. because I want to use
an outside provider(AETNA...) and my question is this:

Should I increase my medical deduction from my paycheck in
order to cover the $10,000 or would it be more beneficial to
me in terms of taxes if I claim my medical exp. at tax time.
I know that it must be over 7.5% of my income and it more
than qualifies but I am not sure which is better.

Any help would be greatly appreciated!

Pete

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