How to Make Medical Expenses Hurt Less – S.O.D Pt. 2

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** HighPoints Blog Series **

*A Series of Deductions pt 2*

We all know that there is no prescription painkiller for medical bills. The financial pain can stay with you long after the physical suffering has been relieved. In fact it can be even more stress inducing than the medical procedure you just endured! Luckily there is a natural remedy to help with this.


My Journey


My medical journey began earlier this year and will be a likely be a lifelong one. In early January some occasional lower back pain I had started getting worse. Cut through months of me complaining and suffering through it with a chiropractor appointment here and there. In June the pain from sitting becomes unbearable and I go to the doctor.

Let’s fast forward one more time through a series of doctor appointments, prescriptions, tests, exams, and scans. Finally – a result! I have a genetic degenerative disc disease that was letting my lower three vertebrae bulge against my sciatic nerve, causing intense discomfort. Unfortunately knowledge is only half the battle and the second half was just beginning.

I am in the process of getting some surgical steroid shots in my back, a series of three over the next six weeks. The shots themselves are working so far… but at what cost? Normally that’s a hypothetical question posed by an over-dramatized movie character but in this case I’ll tell you. $860 after my insurance.   


What’s More Uncomfortable? Pain or Poverty?

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Yes, that’s a legitimate question you might have to ask yourself. Calculated out you would be spending at least $2,580 on these shots not including any additional hospital fees (and you thought banks were bad?). By the end of this stage, with a follow up MRI, exam, and any leftover bills from the last stage you’re looking at roughly $4,000 in medical debt.

Now you might not have an extra $4k laying around. Luckily all might not be lost.


Tax Code is Your Friend

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Not exactly a sentence you were expecting to hear in your life? I feel the same way! Did you know the state of Arizona offers you a 100% tax deduction on your health care expenses? What this means is that I can deduct my total health care expenses (which I’m roughly predicting to be $6,000 by December 31st) from my taxable income.

The “Gross” Math

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Yes, an accounting math pun. Assuming I pulled in $31,200 AGI, my normal tax payment 

(3.36%) would be $1,048 but due to the medical expense I will be paying $726. Since I am now at a lower tax bracket of 2.88% (by being under $25,450) not only am I paying tax on a lesser gross income amount, but it also happened to lower my bracket as well. In this case it only saves me $322 but it’s a start!

Then you have the federal health deductions. For 2018 you can deduct any qualified health expenses over 7.5% of you AGI (it goes up to 10% in 2019). In my case I can deduct anything over $2,340. So not only can I deduct $6k from my state income tax, I can also deduct $3660 from my federal. In summary – normally I would pay $3,744 in federal taxes but this year it’ll be $3,305. Otherwise known as saving an additional $439.


Combined Deduction:

Combined I am saving $761 in taxes due to my $6,000 health investment. Financially it’s a terrible ROI but for a college student, it’s better than nothing! While we are still in the mood for math – that’s 3805 packs of Ramen (college currency) at my local supermarket.   


How Does This Deduction Affect You?

Knowledge is power! The best action you can take is to know what medical expenses can and cannot be deducted from your taxable income. According to Intuit TurboTax:

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The IRS allows you to deduct preventative care, treatment, surgeries and dental and vision care as qualifying medical expenses. You 

can also deduct visits to psychologists and psychiatrists. Prescription medications and appliances such as glasses, contacts, false teeth and hearing aids are also deductible.

The IRS also lets you deduct the expenses that you pay to travel for medical care such as mileage on your car, bus fare and parking fees.”



No Double Dipping!

Please note you cannot double dip! Any expenses paid with an FSA or HSA cannot be deducted as they are tax free to begin with.


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