A popular financing option and intelligent long-term investment, LASIK can help eliminate the need for eyeglasses and contact lenses. It also provides added comfort, freedom and convenience when performing daily activities. If you are a good candidate for LASIK or another type of laser vision correction procedure, you can use your Health Savings Account (HSA) or Flexible Spending Account (FSA) to help fund the procedure. Read on to learn how HSA and FSA accounts can play a significant role in funding your LASIK surgery.
HSA vs FSA
FSAs and HSAs are tax-advantaged savings accounts intended to cover medical expenses. While FSAs are provided by employers, however, HSAs are available to individuals.
Both savings options are pre-tax accounts that can be used for LASIK and other types of laser vision correction procedures. That said, while FSA accounts are typically linked to traditional health plans; HSA accounts are usually linked to high-deductible plans.
Unlike FSAs, HSA accounts have a continuous carry-over, meaning any money left over from one year can be used to pay future medical expenses.
Why Use it for LASIK?
HSA and FSA contributions are usually taken out on a pre-tax basis and can be used for several types of qualified medical treatments, including LASIK. Because the money is withdrawn pre-tax, it offers more value than it would if it were taken out after-tax.
An average household’s earnings will fall within a 20% marginal tax bracket, and some taxpayers will have marginal rates as high as 37%. With this in mind, the savings associated with FSA money can be significant. FSAs and HSAs can also reduce your taxable income and make you eligible for Earned Income Credits that can significantly reduce your yearly tax burden. They also provide an excellent opportunity to save money on LASIK since they utilize pre-tax funds.
Use it Or Lose it?
In most cases, you can’t carry over an FSA balance from year to year. This is why it’s best to plan ahead for more significant medical expenditures to make sure you have an adequate FSA balance. You will usually not be able to use FSA dollars saved during a future year to pay off a previous procedure you received in a prior year, even if you financed that procedure and are still making payments.
On the other hand, HSA balances do have a convenient carry-over feature, allowing patients to use the funds when needed and continually save money on a pre-tax basis. This means any money put into your HSA account over the past several years can be utilized for procedures performed during future years. This makes HSAs a great feature for smoothing out LASIK and other medical costs.
Right now, the IRS will only allow you to invest $3,550 each year in an individual HSA and $7,100 in a family HSA. For FSAs, the federal limits are currently set at $2,750, regardless of single vs. family plan participation. That said, if both spouses have aquired FSAs through their individual employers, they could each choose the maximum for their respective accounts for a total of $5,500.
LASIK costs can vary depending on the provider, your prescription and the recommended laser and treatment package for your unique needs. Although charges vary widely by region and practice, the average cost is between $1,500 to $3,000 per eye. That said, your actual costs will depend on the kind of procedure, individual LASIK provider and part of the country.
You can apply your entire HSA or FSA contribution for LASIK. If there is any remaining balance due, you can use an approved financing plan or credit card to cover that balance.
With HSA and FSA accounts, you can pay off a substantial amount of your LASIK procedure pre-tax. It’s important, however, to be cognizant of contribution limits. It’s best to plan ahead for your LASIK procedure and proactively coordinate the scheduling with your provider to ensure that you can adequately leverage your HSA or FSA funds.
You also need to look into potential FSA grace periods that may allow you to maximize the amount of time you have to save. The FSA Grace Period offers extended coverage at the end of each plan year. You can use it to gain extra time to use your remaining FSA balance even after the close of the previous plan year. The Grace Period is generally two-and-a-half months through March 15th of the following year.