Taxes on Medical Services and Products: FSA Eligibility

Taxes on medical services and products are eligible for reimbursement with a flexible spending account (FSA), health savings account (HSA), or a health reimbursement arrangement (HRA). Taxes on medical services and products are not eligible with a dependent care flexible spending account (DCFSA) or a limited care flexible spending account (LCFSA).

What are taxes on medical services and products?

Taxes that are spent on purchasing medical services and products are eligible for reimbursement with a consumer-directed healthcare account. Country, state and federal taxes may all be counted for this purpose.

Taxes on goods and services, including medical services and products, are typically levied on the final consumer or costumer. Taxes are controversial because of allegations that they discourage consumption due to the price increase. Basic necessities like food and public transportation are less likely to be taxed, because they are needed by citizens of all income levels. Taxes usually raise the cost of a good or service by a flat percentage, and therefore the wealthier a citizen is, the less of their income is spent on taxes. Taxes are therefore considered regressive in certain circumstances, and removing taxes from basic necessities is one measure taken by governments to mitigate this.

Taxes are often higher on luxury items and vices. Luxury items may include fashion items, cosmetics, vehicles, and rare minerals. Vices include cigarettes, sugary drinks and food, alcohol, etc. Taxes on these items may grow to a larger sum than the original market price for the item, especially when an item's taxes are diverted to public-health spending or public good programming to mitigate the effects of public consumption of that item without actually banning it. The most common example of this dynamic is cigarettes.

Taxes paid when purchasing medical services and products are rare, but if they are part of the expense, then the tax costs are reimbursable.

Eligibility Table

Flexible Spending Account (FSA) Limited Care FSA Dependent Care FSA Health Savings Account (HSA) Health Reimbursement Account (HRA)

Eligible

Eligible with Rx

Eligible with LMN

Not Eligible

 


AZ-PROD-WEB02 11/19/2017 6:28:47 AM