What are pre-tax medical funds?

Answer 1

An example is probably the best way to explain this. Let's suppose your company offers health insurance, but, you have to pay $100 a month. It is taken out of your paycheck.

Let's also suppose that your combined Federal and State tax rate is 25%.

If the $100 is taken out the old (non-pre-tax) way, your take home pay goes down by $100.

On the other hand, if the company takes it out on "pre-tax" basis, your taxable income goes down by $100, but your take home pay only goes down by $75! Good deal, right? This is because, even though you never got that $100, you were taxed $25 dollars on it. By making the $100 "pre-tax", you get back those $25 dollars.

Answer 2

I think you are referring to an employee benefit that's a flexible spending account, that you have deducted from your paycheck (pretax) that you use for medical expenses during the course of the year. You determine the amount (say 1200.00) and then during the year you have a debit type card that hits this account- whenever you buy approved things- even co pays for meds, dr visits, cough/cold meds, whatever's covered on the list. It's a use it or lose it deal- if you set aside 1200.00 and only spend 999.00, you lose the balance, and can't roll it over. So you have to be careful not to put too much into the account. But the tax savings is nice- esp if someone in your family has a chronic condition like diabetes or asthma, and you know you'll have costs.

Answer 3

Pre-Tax medical funds that can be accumulated by every single American is called a "Health Savings Account" (H.S.A). No qualifications are needed to open up a H.S.A., lots of advantages espeically for anyone who is self employed, or anyone earning income. You see another advantage of a HSA is that it reduces your adjusted gross income by contributing to an HSA (similar to an IRA), the big difference between this and a traditional IRA (Individual Retirement Account) is that you can spend the money in the HSA before hitting 65, just so funds are spend on medical qualified expenses (the list can be found on www.HSAInside.com) One of the biggest benefits for consumers regarding HSA's is that you don't "use it or loose it", all funds belong to you- until you spend them on medical expenses or you want to spend them after you turn 65. Health savings accounts
New for 2007:
The bill also increases the tax-free-contribution limits for health savings accounts for 2007. The limits, now $2,700 for singles and $5,450 for couples filing jointly, would rise to $2,850 and $5,650 in 2007.

Health savings accounts, an alternative to employer-provided health insurance, allow taxpayers to save money tax-free toward future health-care expenses. They require enrollment in a catastrophic-health-care plan, which cut premiums drastically but typically don't cover the first several thousand dollars in costs. Those costs are paid from the savings account.


Limited plans, would be HRA (Health Reimbursement Accounts) these are also known as flex accounts, where the employer takes the tax break - and don't really give the employee the flexibility of growing year to year (this is a use it, or loose it account), great for the employer- because unlike HSA accounts when an employee leaves employment he/she takes his/her account with them whereas on a HRA they loose whatever is in the account.

Answer 4

This is hard to answer with so little information but it can be the money you put away during the year from your pay check to pay for medical expenses not covered by your plan.

This is often referred to as a Health Care Spending Account.