Healthcare is expensive, especially as we get older. Fortunately, there are some tricks you can use to cut your healthcare expenses down to a more reasonable size.
1. Group your medical expenses
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Medical expenses are deductible, meaning that you can get a tax break for claiming them on your federal return. However, this tax break comes with a couple of catches. First, you can only claim the medical expense deduction if you itemize, which only makes sense if your itemized deductions are greater than your standard deduction. And second, you have to subtract 10% of your AGI (adjusted gross income) for the year from your medical expenses before you can deduct the rest. So for most people, deducting medical expenses only makes sense if they have a lot of medical expenses.
That's where grouping your expenses comes in. If you can arrange to have a whole bunch of medical expenses in a single year, you can end up with enough expenses that you'll be able to claim the tax break and get some money back. So if you find out you need some expensive medical procedure done, see what else you can schedule for the year. Maybe your spouse has been putting off some heavy-duty dental work, or your child is due for a new pair of eyeglasses. By delaying some expenses and expediting others, you may be able save a great deal of money courtesy of this deduction.
2. Use an HSA
Another way to get a tax break on medical expenses is to get a health savings account and use it to fund your healthcare costs. HSAs are the only triple-tax-advantaged account: if you use the money in the account to pay for qualified medical expenses (which basically includes anything that can be deducted as a medical expense), you get a tax break on the money you put in, another tax break when you take the money out, and the returns you make on the money inside the account are also not taxed.
Before you can get an HSA, you need to sign up for an HSA-enabled health insurance policy. These policies all have high deductibles, which means they also tend to have below-average premiums -- yet another way to save a little money. Once you sign up for such a policy, make sure to put at least enough in the HSA to cover an entire year's deductible. That will give you an easy source of funding regardless of what medical catastrophes face you in the year to come.
3. Use your plan's freebies
Health insurance companies know that prevention is not only better than a cure, it's a lot cheaper, too. So they try to motivate policyholders to stay in good health by offering free or low-cost preventive health services. Such services can include discounted gym memberships, free flu shots, nutrition classes, and more. Acquaint yourself with your policy's free offerings, and don't hesitate to indulge. Not only will you save money on things you might otherwise have bought at full price, you'll also be taking steps to keep yourself in good health.
4. Reduce your prescription costs
Prescription costs can be a big part of your healthcare expenses, especially if you take certain medications on a regular basis. It's possible to reduce these costs by buying generic versions of your medications whenever possible, shopping around to find pharmacies with the best deals, using mail-order pharmacies, and taking advantage of drug rebate programs and other discounts.
5. Pick the right insurance plan
Health insurance plans can vary enormously on what and how much they cover, not to mention premiums and other costs. Employer-provided health insurance will often be the cheapest option, but if you don't have access to such a plan, you may be able to find group coverage elsewhere (such as associations or even clubs). Once you've identified a good source for health insurance, compare plans carefully to see which one will be the best deal. Depending on your healthcare needs, a plan with high premiums may work out to be the best option.
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