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Facing tax choice on flex spending accounts

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. Due to an expensive surgery, I’m over the medical deduction limit in 2012. Can I pay additional expenses personally instead of using my FSA? K.C., Bethesda, Md.

A. Yes. In this case, you will have to decide between taking a tax deduction on your personal return for qualified medical expenses or receiving funds tax-free from the flexible spending account (FSA) to pay for qualified expenses. But you can’t do both, so do the math.

For 2012, qualified expenses are deductible to the extent the overall total exceeds 7.5% of your adjusted gross income (AGI). Beginning in 2013, the AGI floor generally increases to 10% of AGI.

Tip: In 2013, contributions to health care FSAs are capped at $2,500.

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