Medical Savings Account/Healthcare Savings Account 

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Some Employers offer a Medical Savings Plan and some individuals have Healthcare Savings Accounts. If you have one of these, here are some ideas on how you can use them to help pay for therapy.

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Money Mechanics. At the beginning of the plan's annual open enrollment period, you ask your employer to reduce your salary by up to $208.33 per month, in order to pay for treatment. In any one year, for one covered person needing treatment, the combined deductions allowed under Section 129 and IRS Form 1040 cannot exceed $2,500. If a dependent also is eligible for this deduction, the combined annual total covered cannot exceed $5,000, for a total maximum monthly salary deduction of $416.66. For income tax purposes, a person's taxable income would be computed on the basis of this deduction. You turn in receipts for your treatment every month to your employer. Your employer will then issue you a non-payroll check every month, reimbursing you for the amount you have had deducted from your payroll check, up to the full amount or for the amount of the receipt, whichever is greater. This goes on until the annual maximum has been reached. You pay your therapist directly.

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Cautionary Notes. IRS regulations don't permit you to change your mind mid-year about participation in the plan. Once in, you are in to stay for the year, or you risk missing out on receiving reimbursements. It may sound complex, but in actuality, it isn't. Get your own tax advisor to send you material on Section 129 regulations so you can be better advised on its use.

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Broad Applications. Section 129 coverage is fairly broad. It covers such things as: hypnosis for the treatment of illness; treatment of alcoholism or addiction; membership fees in associations furnishing medical or clinical care; and psychiatric and psychotherapeutic care. Even day care for children under 13 is covered, so if you should conclude your therapy early, you can shift your covered expenses to other activities.