Medical Reimbursement Plan & Taxes and OTC Drugs

[Guest M L Sullivan]

Two questions:

1. I am almost certain that an employee cannot seek tax credit for medical expenses (7.5% of adj gross income) and participate in the medical reimbursement plan too. But someone asked a good question - if an employee elected say the maximum our medical reimbursement plan offers per year of $500, and in the plan year the employee has an unexpected $4000 medical bill, is the employee essentially out of luck as far as claiming that on his/her taxes? It seems unfair if the employee has an unexpected huge medical expense and can't claim that on his/her taxes. Do they have to simply choose one or the other and then hope they don't have a huge expense?

2. I am reading two different things regarding over-the-counter (OTC) drugs and medical reimbursement plans. One items says that OTC drugs are not covered even if your doctor prescribes them (such as pre-natal vitamins) another says that OTC drugs are reimbursable if your doctor prescribes them.

Any help out there?

[KIP KRAUS]

As far as I know OTC drugs are never covered under a FSA or on your tax return regardless of the doctor's recommendation. As to taking the additional deductions on your tax return, I'm not sure. However, it makes sense to me that you could.

[Mary C]

Kip is right - OTC drugs are not covered even if prescribed.

You can deduct any unreimbursed medical expenses on your tax return, but you cannot deduct any expense you made an FSA claim for. In your example above, the employee has $4,000 expenses and gets $500 back from the FSA. $3,500 could be deducted on the tax return.

[Guest Joe Vasko]

First, an employee can take advantage of both the Medical Reimbursement Account at there place of employment, as well as itemize these deductions on their federal income tax return (Schedule A). However, the expenses can not be the same for both.

Second, under IRS Publication 502 (Medical and Dental Expenses) lists the eligible expenses for both the FSA Plan and deductions on Schedule A. If the expenses is prescribed by a Doctor, then it would be considered eligible. If you buy vitamins OTC, these expenses are not deductible.

Hope this helps.

Thanks,

Joe

[KIP KRAUS]

Doctors can write prescriptions all day long for OTC medications, but they don't qualify for FSAs or tax deductions. First of all you don't need a prescription for OTC medications. I don't think Recommendations by doctors are prescriptions.

[Guest RAJ]

I agree with Kip. The only OTC item I know of that is allowable is contact lense solutions. Anything else is not eligible. As claim substantion, the prescription should include the Rx number and not just a "recommendation" from the doctor.