I scheduled a root canal for the end of the month. Once that tooth is taken care of, I should be able to sleep and think better. Duke dental insurance will pick up a small portion of the expense. Most of the cost will be out of pocket. I will throw it on a credit card and then submit most of the personal component of the procedure’s cost to a health reimbursement account. By mid-March, I should get a nice big check back from that account to pay off the credit card while still collecting airline points.
An HRA is a tax advantaged vehicle that employers can set up for their employees. The money can be spent on a wide variety of medical costs including dental/vision services as well as cost sharing obligations. I get a significant tax advantage from it. I don’t have to pay income or FICA taxes on the part I’ve added to the account on top of what Duke added. The part that I throw into the account is immediately taken off the top of my total compensation for tax purposes.
I am getting about a 30% net tax discount for my root canal. Thanks for the help everyone!
2019 Me is doing well. I have a great job that pays well while having me do things that I love to do. My wife has an awesome job. We are secure. We have both liquid and quasi-liquid reserves.
2010 Me was stretched in fifteen different directions. I was out of work, my wife was massively underemployed and we had a one year old at home. My wife and I were uninsured. My daughter was on CHIP (best insurance we ever had!). I got to spend the year with my daughter as not paying for day care and surviving on unemployment was the best of bad options.
Assuming that 2010 Me had an HRA with a non-zero balance, and if I needed a root canal, I would be getting a 17% discount (FICA and 10% tax bracket) from the Feds.
That year was probably the most financially stretched year that I will experience as an adult. This year looks to be the easiest year financially. I’m not going to turn down the help but this is a jacked up system. I am getting the most federal aid for a root canal in a year when I have the most capacity to grumble, mumble and bear the cost. In 2010, a root canal done by a licensed and trained dentist would have been a major financial emergency. I would have been flipping the coin behind my mouth and my mortgage. And I would be getting very little help.
Deductions to taxable income are asinine when those deductions are applying to medical expenses. Credits or capped deductions with bump-ups to send the help to the people with the highest marginal utility of the last dollar would make way more sense from a policy and a moral perspective.