Can we use our current year medical FSA to reimburse ourselves for credit card charges related to medical expenses incurred in the previous year?

[leric9027]

I've currently paid for a large 2017 medical expense all through my credit cards. I am paying those expenses slowly on a monthly basis.

I am setting up my medical FSA for the upcoming 2018 year to see how much of my paycheck I should contribute on a pre-tax basis. I anticipate that I'll be still paying off this large 2017 medical expense in 2018, and want to know if I can reimburse myself through my 2018 FSA for the "2017 medical expense" because I'll be technically paying off the "2017 medical credit card expense in 2018."

Is this allowed? If not, then I wouldn't even factor this 2017 expense into my anticipated 2018 medical expenses.

[Wesley]

Publication 969 - Generally, distributions from a health FSA must be paid only to reimburse you for qualified medical expenses you incurred during the period of coverage. 

You won't be able to use the 2018 FSA funds to pay off your 2017 medical expenses, but you may be able to deduct your 2017 medical expenses if you itemize your deductions and the medical expenses exceed 10% of your Adjusted Gross Income (7.5% if you are 65 and older).

[leric9027]

This was very helpful!

I have an HSA account for 2017 that my employer offers an allowance for. Unfortunately, my 2017 medical expenses far exceed the allowance that I was given. I should have contributed to my HSA account but I didn't know that I'd incur such large expenses for the entire year (my insurance doesn't cover most of these expenses as my deductible is pretty high).

My follow up question is, is there any way from now till the end of 2017, that I can contribute to my HSA to cover the remaining medical costs that my original HSA allowance couldn't cover? Even if I itemize my deductions, my medical expenses do not exceed 10% of my AGI.

[TaxGuyBill]

Yes, you can contribute to your HSA until April 15th.  You can ask the bank (or whoever has the HSA) how to contribute to it.  You will enter the non-employer contributions in TurboTax as a separate thing (the contributions through your employer show up on your W-2).

For future reference, it is usually better to contribute through your employer because it save both income tax AND Social Security/Medicare taxes (FICA).

I also want to caution you in the event you BOTH FSA contributions and HSA contributions in the same year.  Unless they are specifically designed to work with each other (such as the FSA only pays after the deductible is met, or only covers dental and vision), the FSA would disqualify HSA contributions.

[leric9027]

@TaxGuyBill Thank you for your insight. Some follow up questions based on your response...

1) How would I make my HSA contributions through my employer to take advantage of the reduction of both income tax and FICA? Would I have to get in touch with HR and have them adjust my contribution amounts to my paychecks?

2) Our company is currently going through an open enrollment period. I don't anticipate using my HSA moving forward as it was initially opened to receive the medical allowance that my company offers. While it's nice to get the allowance, the insurance plan does come with a high deductible and I anticipate that for 2018, my medical expenses will be high. Therefore, I'm switching over to the Medical FSA because going this route gives me a much lower deductible.

My question is, how would I find out if having an FSA would disqualify my HSA contributions?

[TaxGuyBill]

1)  You can ask HR, but most employers usually only changed during open enrollment, so you may need to contribute directly

2)  If you have a FSA in 2018 and your HSA contributions are all in 2017 (or 'for' 2017), there is not a problem.  You can also withdraw from the HSA during 2018 without any problem.  You just can't contribute to the HSA in 2018 (unless they are specifically compatible).

If you are switching to a non-high deductible health plan, you (or your employer) can't contribute to the HSA.

If you still had the High Deductible Health Plan, the FSA would need to be designed so that it (1) would ONLY pay out after the high deductible was met, or (2) it would ONLY pay for things like dental and vision.