The following tax plans cover ACMA treatments and ACMA cancer treatments. If you have any questions on following tax plans, please consult your accountant or contact IRS directly (IRS phone: 800-829-1040, website: www.irs.gov).
Flexible Spending Arrangement (FSA)
A Flexible Spending Arrangement (FSA; sometimes called a Flexible Spending Account) is a benefit provided by some employers that offers a way to help pay for out-of-pocket medical expenses, while reducing the employee’s taxable income.
With FSAs for health-related expenses, you choose an amount of pre-tax dollars to be set aside from your paycheck each pay period. This money is then available to reimburse certain health-related expenses that are not paid any other way, such as by insurance.
Health Savings Account (HSA)
Another type of tax-exempt benefit for health-related expenses is a health savings account (HSA). Set up by Congress in December 2003, HSAs allow some individuals who participate in a high-deductible health plan to save money in a tax-free account. If you are eligible, you can use these savings to pay for your future medical expenses or those of your spouse or dependents. The IRS has publications with more information about FSAs and HSAs. The Department of the Treasury also has a direct link to information about HSAs on its web site.
A cafeteria plan is a separate written plan maintained by an employer for employees that meets the specific requirements of and regulations of section 125 of the Internal Revenue Code. It provides participants an opportunity to receive certain benefits on a pretax basis. Participants in a cafeteria plan must be permitted to choose among at least one taxable benefit (such as cash) and one qualified benefit.
A qualified benefit is a benefit that does not defer compensation and is excludable from an employee’s gross income under a specific provision of the Code, without being subject to the principles of constructive receipt. Qualified benefits include:
- Accident and health benefits (but not Archer medical savings accounts or long-term care insurance);
- Health savings accounts, including distributions to pay long-term care services. The written plan must specifically describe all benefits and establish rules for eligibility and elections.
The plan may make benefits available to employees, their spouses and dependents. It may also include coverage of former employees, but cannot exist primarily for them.
Employer contributions to the cafeteria plan are usually made pursuant to salary reduction agreements between the employer and the employee in which the employee agrees to contribute a portion of his or her salary on a pre-tax basis to pay for the qualified benefits. Salary reduction contributions are not actually or constructively received by the participant. Therefore, those contributions are not considered wages for federal income tax purposes. In addition, those sums generally are not subject to FICA and FUTA. See Sections 3121(a)(5)(G) and 3306(b)(5)(G) of the Internal Revenue Code.
The above discussion provides only the most basic rules governing a cafeteria plan. For a complete understanding of the rules, see the Proposed Regulations under Code section 125.
Income Tax Deductible
Currently, the IRS allows deductibles for ACMA treatments in IRS Form 1040 return. You may claim your ACMA treatments as medical expenses in IRS Form 1040 return. If you have questions, your accountant may help you on this issue.