UNIVERSITY OF MAINE SYSTEM
WORKSHEETS FOR HEALTH CARE AND DEPENDENT DAY CARE
FLEXIBLE SPENDING ACCOUNTS (ADVANTAGE ACCOUNTS)
HEALTH CARE FLEXIBLE SPENDING ACCOUNT
With this account, you can save money by using before-tax dollars to pay for medical expenses and dental expenses not paid under your group health plan, including your deductible and other out-of-pocket expenses. The key to maximizing your savings is careful planning. Check your records of the medical and dental bills you paid over the last two years. Is your situation likely to be the same this year? Or are there additional expenses that are likely to arise? The following partial list of eligible and ineligible health expenses for the Health Care Flexible spending account should help you decide how much to deposit in your account this year.
ELIGIBLE HEALTH CARE FLEXIBLE SPENDING ACCOUNT EXPENSES
These are some examples of expenses allowed under the health care flexible spending account. To qualify, items or services must be prescribed and performed by a licensed practitioner and you must have a receipt. PROFESSIONAL SERVICES
Christian Science Practitioner Chiropractor Oculist Optometrist Optician Plastic surgeon
Practical or other nonprofessional nurse for medical services only Psychiatrist Psychoanalyst Psychologist Registered nurse Health services not paid in full under the group health plan
MEDICAL SERVICES
Abortion Acupuncture Blood transfusion Diathermy Electric shock treatments Healing services Hydrotherapy (water treatments) Injections Insulin treatments X-ray treatments
Lasik/Laser Surgery Nursing Organ transplant Prenatal, postnatal treatments Psychotherapy Radial Keratotomy Radium therapy Sterilization Ultraviolet ray treatments
DENTAL SERVICES Uncovered dental and/or orthodontic expenses
LABORATORY EXAMINATIONS AND TESTS Blood tests Cardiographs Metabolism tests Spinal fluid tests Sputum tests Stool examinations Urine analyses X-rays
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EQUIPMENT AND SUPPLIES Abdominal supports Air conditioner where necessary for relief from an allergy or for relieving difficulty in breathing Ambulance hire Arches Artificial teeth, eyes, prosthesis Autoette (auto device for handicapped person), but not if used to travel to job or business Back supports Braces Car controls Contact lenses, including replacements and supplies such as saline solution and enzyme cleaner Cost of installing stair-seat elevator for person with heart condition Crutches Elastic hosiery Eyeglasses Fluoridation unit in home Hearing aids Invalid chair Iron lung Orthopedic shoes Oxygen Reclining chair if prescribed by doctor Repair of special telephone equipment for the deaf Sacroiliac belt Splints Truss Wig advised by doctor as essential to mental health of a person who lost hair from a disease
MEDICINES Cost of drugs that require a prescription Over-the-counter drugs if used to alleviate or mitigate a specific disease, sickness, or injury Insulin
OTHER ELIGIBLE EXPENSES Birth control pills or other birth control items prescribed by your doctor Braille books – excess cost of Braille works over cost of regular editions Convalescent home – for medical treatment only Kidney donor’s or possible kidney donor’s expenses Legal fees for guardianship of mentally ill spouse where commitment was necessary for medical treatment
Medical Information Plan maintaining individual’s medical information by computer Nurse’s board and wages, including Social Security taxes you pay on wages Remedial reading for child suffering from dyslexia “Seeing-Eye” dog and its maintenance
Deductibles and other out-of-pocket expenses (medical and dental)
Elective surgery (not cosmetic surgery) Fees paid to a clinic for weight loss or smoking cessation programs as prescribed by a physician Fees paid to a health institute where the exercises, rubdowns, etc., taken there are prescribed by a physician as treatments necessary to alleviate a physical or mental defect or illness In-patient care for mental health, drug or alcohol rehabilitation beyond the Plan maximum Breast pump Wages of a guide for a blind person
Special school costs for physically and mentally handicapped children
Telephone-teletype costs and television adapter for closed caption service for deaf person Transportation amounts paid primarily for, and essential to, medical care
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INELIGIBLE HEALTH CARE FLEXIBLE SPENDING ACCOUNT EXPENSES
Health care expenses are not eligible for reimbursement if they do not qualify for legitimate deductions for federal income tax purposes. The following list may not be all inclusive; however, it does note most expenses that will not qualify for reimbursement. • • • Electrolysis Premiums for health and dental coverage. Over-the-counter drugs, except as described on page 2. Please note that Internal Revenue Service regulations do not permit reimbursement of medications, purchased for cosmetic remedies, vitamins, dietary supplements, or other things of that nature that are taken for general good health and welfare. • • • • • Marriage or family counseling. Cosmetic Surgery*. The salary expenses of a licensed practical nurse (LPN) incurred in connection with the care of normal and healthy newborn. Funeral and burial expenses. Household and domestic help (even though recommended by a qualified physician due to employee's or dependent's inability to perform physical housework). • • Custodial care in an institution. Costs for sending a problem child to a special school for benefits the child may receive from the course of study and disciplinary methods. • • • Any expenses incurred in connection with an illegal operation or treatment. Health club dues, YMCA dues, steam bath, etc. Social activities, such as dance lessons or classes (even though recommended by a qualified physician for general health improvement). • • • • • • Membership fees or costs associated with weight-loss or stop-smoking programs for general health and well-being purposes. Bottled water. Maternity clothes, diaper service, etc. Cosmetics, toiletries, toothpaste, etc. Uniforms. Automobile insurance premiums including the segment of premiums providing medical coverage for persons injured through accident by an employee's car. • Premiums paid for life insurance policies or for policies providing repayment for loss of earnings or for accidental loss of life, limb, sight, etc. • • Premiums paid for contact lens insurance. Vacation for travel taken for general health purposes, a change in environment, improvement of morale, etc., or taken to relieve physical or mental discomfort not related to a particular disease or physical defect. • Transportation expenses to and from work, even though a physical condition may require special means of transportation.
*Cosmetic surgery is not eligible for reimbursement unless the surgery or procedure is necessary to correct a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. You generally cannot include amounts paid for procedures such as fact lifts, hair transplants, hair removal (electrolysis), teeth whitening, and liposuction.
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DEPENDENT DAY CARE FLEXIBLE SPENDING ACCOUNT
With the dependent day care flexible spending account, you can save money by using before-tax dollars to pay for eligible child care or dependent day care expenses. The law includes a provision for a direct credit against federal income taxes. This worksheet provides a description of the covered and non-covered expenses and a step-by-step process to help you compare the dependent day care account to the federal tax credit. Dependent day care expenses are expenses incurred by you to enable you to work. If you are married, the expenses must be to enable you and your spouse to work, or your spouse to attend school on a full-time basis. The expenses must be for the care of your dependent who is under age thirteen and for whom a personal exemption deduction is allowed for federal income tax purposes, or the care of your dependent or spouse who is physically or mentally incapable of self-care, or household services in connection with the care of such a person. Examples of expenses allowed under the dependent day care account are listed below: • • Amounts paid to a babysitter, nurse, or a child care center that provides care for more than six non-residents. Amounts paid for services performed outside your home for the care of your dependent or spouse. If the care is for a dependent (see above) who is age thirteen or older, the dependent must spend at least eight hours each day in your home. The full amount paid to a nursery school, even though the school provides lunch and educational services. Amounts paid to a maid or cook, if part of the services are provided to a person who qualifies for dependent day care. Amounts paid to a relative who provides dependent day care services, if the relative is not your or your spouse's dependent for whom a personal exemption deduction is allowed for federal income tax purposes, and is not your child or stepchild who is under age nineteen at the end of one year. Examples of expenses that are not covered are listed below: • • • • The cost of food, clothing and education. The cost of transportation between your house and the place where dependent day care services are provided. Expenses for which a federal dependent care tax credit is taken, or which are taken as medical care reimbursement. The cost of overnight camp.
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If you are single or married filing a joint tax return, the maximum amount that can be reimbursed (i.e., deposited) is the lowest of 50% of your earned income, 100% of your spouse's earned income, or $5,000. If you are married and you file a separate tax return, the maximum amount that can be reimbursed (i.e., deposited) is the lower of 100% of your spouse's income or $2,500. If your spouse is a fulltime student or is incapable of self-care, your spouse's earned income is assumed to be not less than $200 per month if you provide care for one person and $400 per month if you provide care for two or more people. When you file a claim form, you will need to include the dependent day care provider's name, address, Social Security number or taxpayer identification number, in the space provided.
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DEPENDENT DAY CARE FLEXIBLE SPENDING ACCOUNT (DDCAA) WORKSHEET - 2008
This worksheet will help you arrive at an estimate of the relative tax advantage you might achieve with the dependent day care flexible spending account (DDCAA) or the federal tax credit. For purposes of illustration, this worksheet has been simplified; it does not include federal income tax adjustments, state income taxes or itemized deductions. It does, however, include the federal standard deduction. To accurately calculate savings, use your most recent tax figures allowing for significant increase/decrease in salary or expenses. To complete this worksheet, enter the appropriate amounts in columns (1) and (2) - except for lines (2), (9) and (13).
Column 1 Federal Tax Credit Enter annual W-2 gross income (combined W-2 if filing jointly). Enter your estimated annual expenses in column 2 (DDCAA). Subtract line 2 from line 1 (your income after DDCAA deposits). Multiply by $3,400 your number of exemptions (take one for yourself, one for your spouse, one for each of the children you claim as dependents). Subtract line 4 from line 3. Enter your federal standard deduction (from next page). Subtract line 6 from line 5 to get your estimated taxable income (subtotal). Enter your estimated federal tax from the 2008 Tax Rate Schedule (from next page), using the estimated taxable income in line 7. You will have to calculate two tax estimates since the amounts of your estimated taxable income in columns 1 and 2 are different. Enter the estimated tax credit for dependent care expenses in column 1. • Obtain annual income from line 1. • Obtain tax credit percentage from the table on next page and multiply this times child care expenses (max. $3,000 for one child, $6,000 for 2 or more children).♦ Subtract line 9 from line 8 to get your estimated net federal tax. Multiply line 3, if filing individually, or each income included in line 3, if filing jointly (up to a maximum of $102,000* for each income) by .0765 to get your Social Security tax (FICA). Subtract lines 10 and 11 from line 3 to get your estimated take-home pay subtotal. Enter all of your 2008 dependent day care expenses in column 1. (This amount should be the same as the amount you listed on line 2, column 2.) 13. Subtract line 13 from line 12 to get your estimated net income. 14. 1. 2. 3. 4. 5. 6. 7. $ N/A
Column 2 DDCFSA $
8.
9. 10.
N/A
11. 12. N/A
$
$
If line 14/column 1 is greater than line 14/column 2, the tax credit will probably generate more savings for you. If column 2 is greater, then the dependent day care flexible spending account would probably be best. ♦ Current law affects the amount available for using both the federal tax credit and the dependent day care flexible spending account. (See example on the next page). For amounts in excess of $102,000, multiply by 1.45. Based on 2008 Social Security taxable wage base.
*
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2008 Federal Standard Deduction Single/Married Filing Separately Married Joint Return $10,900 $5,450 ________________ 2008 Tax Rate Schedule* Married Joint Return Taxable Income $8,000 to $23,550 $23,550 to $72,150 $72,150 to $137,850 $137,850 to $207,700 $207,700 to $365,100 over $365,100 Tax Rate 10% $1,555 + 15% $8,845 + 25% $25,270 + 28% $44,828 + 33% $96,770 + 35% Of the Amount Over $8,000 $23,550 $72,150 $137,850 $207,700 $365,100 Head of Household $8,000 __________________________________
Single (including head of household) $2,650 to $10,300 $10,300 to $33,960 $33,960 to $79,725 $79,725 to $166,500 $166,500 to $359,650 over $359,650
Tax Rate 10% $765.00+ 15% $4,314.00+ 25% $15,755.25+ 28% $40,052.25+ 33% $103,791.75+ 35%
Of the Amount Over $2,650 $10,300 $33,960 $79,725 $166,500 $359,650
* Figures have been estimated based on the Internal Revenue code in advance of actual adjustments from the IRS.
2007 Tax Credit Table (2008 Tax Credit Not Available At Time of Printing) Annual Income or, if Married and Credit Percentage Filing Jointly, Combined Income Over $0 to $15,000 35% $15,000 to $17,000 34% $17,000 to $19,000 33% $19,000 to $21,000 32% $21,000 to $23,000 31% $23,000 to $25,000 30% $25,000 to $27,000 29% $27,000 to $29,000 28% $29,000 to $31,000 27% $31,000 to $33,000 26% $33,000 to $35,000 25% $35,000 to $37,000 24% $37,000 to $39,000 23% $39,000 to $41,000 22% $41,000 to $43,000 21% $43,000– No Limit 20% Example
Contributions to the dependent day care flexible spending account affect the amount you can deduct for the federal tax credit as follows. The amount of the expenses eligible for the credit (max. $3,000 - one child; $6,000 - two or more children) is reduced by the amount of your dependent day care flexible spending account deposit. For example, if you have expenses of $3,000 for the care of one child, and you deposit $3,000 into the dependent day care flexible spending account, you cannot take the federal tax credit since the amount of your deposit ($3,000) equals the amount of the expenses eligible for the credit ($3,000). On the other hand, if you have expenses of $3,000 for the care of one child, and you deposit only $2,000 into the dependent day care flexible spending account, you can take the federal tax credit since the amount of your deposit ($2,000) is less than the maximum amount of the expenses eligible for the credit ($3,000). In this case, the amount of expenses eligible for the credit equals $1,000 ($3,000 - $2,000 = $1,000).
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