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FSA

Q&A: What can retirees do to deduct medical expenses?

August 5, 2025 By Liz Weston Leave a Comment

Dear Liz: My wife and I, both in our early 90s, are fortunate to have good health insurance. However, we have significant expenses that are not covered. As you might expect, we are retired and receive income from Social Security, pensions, annuities and investments. Are we eligible to use flexible health accounts funded with pretax dollars? If so, what’s the best way to set that up and how would we pay those uncovered health bills?

Answer: Unfortunately, you don’t have access to pretax accounts that could help you pay medical bills.

Flexible spending accounts are offered by employers, and contributions are limited annually (in 2025, the limit is $3,300). Health savings accounts have higher limits but require you to have a qualifying high-deductible health insurance plan. Once you’re on Medicare, as you two presumably are, you are no longer allowed to contribute to an HSA.

You might be able to deduct medical expenses that exceed 7.5% of your adjusted gross income. To claim the deduction, you would need to have enough itemized expenses to exceed the standard deduction, which in 2025 is $34,700 for a married couple filing jointly who are 65 and older. (The standard deduction for a married couple filing jointly is $31,500, while people 65 and older get an additional deduction of $1,600 each.)

There’s also a new, temporary $6,000 deduction for people 65 and older that is available whether you itemize or take the standard deduction. This bonus deduction begins to phase out for adjusted gross income above $150,000 for married couples filing jointly and disappears at AGIs above $250,000. This deduction is set to expire after the 2028 tax year.

Filed Under: Health Insurance, Medical Debt, Q&A, Retirement Tagged With: Flexible Spending Account, FSA, health savings account, HSA, itemized deductions, medical expense deduction, medical expenses, medical expenses in retirement, out-of-pocket medical expenses

Q&A: Flexible spending account use-or-lose deadlines are back after a pandemic hiatus

November 14, 2022 By Liz Weston

Dear Liz: The hospital where I work was bought out by another hospital last summer. I was in a flexible savings account at that time with my workplace. I had to enroll in a second FSA through the new medical facility. Trying to keep these two separate FSA accounts was not easy. I thought by March 31 of this year, my 2021 FSA accounts were spent. However, I recently found out I still had $700 left in one of my FSA accounts. I contacted the organization, pleading my case in regards to the midyear takeover and the difficulty of trying to keep two FSA accounts straight. No luck! Do I have any recourse?

Answer: The rules about spending FSA money were loosened after the COVID-19 pandemic hit, but it’s possible your employer didn’t opt in to those changes.

Medical FSAs, which allow employees to put aside pretax money to pay qualified healthcare expenses, have “use it or lose it” provisions that require the money to be spent within certain time frames. Normally, the deadline is Dec. 31, but employers can offer a grace period that extends the cutoff to March 15 of the following year, or allow employees to roll over a few hundred dollars ($550 in 2021 and $570 for 2022).

The federal Taxpayer Certainty and Disaster Tax Relief Act of 2020 gave employers the option of extending their spending deadlines by up to a year, or allowing their workers to roll over all the funds left in their FSAs in 2020 and 2021. Employers weren’t required to make these changes, which have since expired.

If your employer didn’t change its rules, it may not be too late, said Nitasha Kadam, a tax analyst for Wolters Kluwer Tax & Accounting. Plans can be amended retroactively to provide this relief. But the deadline is fast approaching — changes for the 2021 plan year would have to be made by Dec. 31, 2022. It’s worth asking about, although your case might be stronger if you can find co-workers in the same boat.

In any case, this is a timely reminder for other people who have money left in their FSAs: Check the deadlines, and make sure you spend the money before it’s gone forever.

Filed Under: Q&A Tagged With: Flexible Spending Account, FSA

Monday’s need-to-know money news

March 21, 2022 By Liz Weston

Today’s top story: How a home improvement fund can upgrade your new house to a home. Also in the news: Single-income couples, and when to use your FSA and HSA, and how rising inflation could mean your home is underinsured.

How a Home Improvement Fund Can Upgrade Your New House to a Home
A home improvement fund can help you be ready for repairs and updates after you buy.

Smart Money Podcast: Single-Income Couples, and When to Use Your FSA and HSA
Moving from two incomes to one is a financial challenge but can offer couples a chance to build their relationship.

Rising Inflation Could Mean Your Home Is Underinsured
Rising construction costs could leave many homeowners without enough insurance. Here’s how to know you have sufficient coverage to rebuild should the worst happen.

Filed Under: Liz's Blog Tagged With: FSA, home improvement fund, HSA, inflation, single-income couples

Tuesday’s need-to-know money news

March 9, 2021 By Liz Weston

Today’s top story: 5 things agents wish people knew about insurance. Also in the news: 10 factors affecting COVID-era travel, how the new stimulus bill will affect unemployment, and how to spend your FSA before the grace period expires.

5 Things Agents Wish People Knew About Insurance
Agents from across the U.S. clear up a few of the most common insurance misconceptions.

10 Factors Affecting COVID-Era Travel in 2021
Traveling during COVID-19 means making more advance reservations and planning for vaccine or testing rules.

How the new stimulus bill will affect unemployment
PUA benefits are extended.

How To Spend Your FSA Before the Grace Period Expires
Use it or lose it.

Filed Under: Liz's Blog Tagged With: COVID-era travel, FSA, Insurance, insurance agents, stimulus bill, unemployment benefits

Friday’s need-to-know money news

June 26, 2020 By Liz Weston

Today’s top story: How to plan and budget for DIY projects now. Also in the news: How to factor climate change into your air travel, why it’s probably better to lease a car than buy one right now, and new rules for medical and dependent care FSAs.

How to Plan and Budget for DIY Projects Now
Tailor do-it-yourself home projects to fit current circumstances by considering the size, type and cost of the work.

Ask a Points Nerd: How Can I Factor Climate Change Into My Air Travel?
Being intentional about the airlines you choose and how often you fly can help reduce your carbon footprint.

Why it’s probably better to lease a car than buy one right now
5 reasons why leasing is a smart choice during these chaotic times.

New Rules for Medical and Dependent Care FSAs
New rules bring more flexibility.

Filed Under: Liz's Blog Tagged With: budgets, car leasing, climate change, DIY projects, FSA, Points Nerd, travel

Tuesday’s need-to-know money news

May 26, 2020 By Liz Weston

Today’s top story: Credit score drop? How to diagnose why and what to do next. Also in the news: A new episode of the SmartMoney podcast on the safety of Bitcoin, what to do if you’re struggling with IRS delays, and what to do about your FSA contributions if your child care is closed.

Credit Score Drop? How to Diagnose Why, and What to Do Next
Time to check your credit report.

SmartMoney Podcast: ‘Is Bitcoin Safe?’
A look at the popular cryptocurrency.

Try these workarounds if you’re struggling with IRS delays
Tips on how to get help.

What to Do About Your FSA Contributions if Your Child Care Is Closed
The IRS has made some changes.

Filed Under: Liz's Blog Tagged With: BItcoin, child care, credit report, Credit Score, cryptocurrency, FSA, IRS, IRS delays, tips

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