I am currently covered by my wife's health care insurance, which is better than the plan my employer offers. However, her plan doesn't offer a health savings account (HSA).

Fortunately, my company has a flexible spending account (FSA) plan, which can be used to pay for most of the same expenses as an HSA.

In 2025, I signed up for an FSA for the first time. It was near the end of the enrollment deadline, and I elected a total plan-year pre-tax contribution amount of $1,000 without digging deeply into the details of the plan.

Had my employer structured its FSA in a less generous way, my lack of due diligence could have cost me dearly.

HSAs vs FSAs — the differences matter

HSAs are available only for employees enrolled in a high-deductible health plan (HDHP). FSAs are generally offered to those in non-HDHPs.

Both plans enable employees to make pretax contributions that can be used to pay for out-of-pocket medical and dental expenses. Both accounts can generally be used to pay for chiropractic care, weight-loss programs and qualified prescription and over-the-counter medications.

But there are key differences. Once employees enroll in Medicare, they can no longer contribute to an HSA, but they can continue to make FSA contributions.

HSA funds remain in the account until employees use them. They can take their HSA to another employer or move it into a special HSA with a brokerage company when they retire.

HSAs assets grow tax-free, and there are never any taxes on withdrawals if they're used to pay for qualified health care expenses.

FSA contributions, on the other hand, follow a use-it-or-lose-it rule. You elect to contribute a certain amount during a plan year. If you don't use the entire amount you contribute, you might end up forfeiting that balance.

In my situation, I had $400 left in my FSA at the end of 2025. When the new plan year started on January 1, any new claims could be paid for only by my 2026 plan-year contributions.

Understandably, I was worried that I would lose this leftover $400 and called my FSA provider to express my concern. This was a very useful call, since the plan representative patiently described the options some FSA plans can offer to help employees avoid losing their unused contributions.

Grace periods

Some FSAs allow employees a grace period of up to two and a half months to make new claims that are paid by previous year's contributions.

For example, for a plan year that technically ended on December 31, 2025, employees could continue to use their 2025 balances to pay for 2026-plan year claims until March 15, 2026.

'Run-out periods'

Many plans also offer a "run-out period" after the plan year ends. During this time frame, which generally lasts 90 days, employees can still file previous-year claims on remaining funds.

For example, for an FSA whose plan year ended on December 31, 2025, employees could file leftover claims for 2025 medical expenses against their remaining 2025 balance until March 31, 2026.

My plan doesn't offer a grace period. And its run-out period would be no use to me since I didn't have any additional 2025 medical expenses to claim.

FSA rollovers to the rescue

However, to my relief, my FSA plan allows me to roll over up to $660 in leftover 2025 contributions to my 2026 account after 90 days have passed.

I can tap these assets to pay only for 2026 plan-year expenses. And if I have combined 2025/2026 contributions left at the end of the year, I will be able to roll over only the 2026-adjusted maximum of $680 into my 2027 balance.

While all FSA plans can offer run-out periods, they can either offer grace periods or rollovers. They can't offer both.

Personally, I'll take the rollover option anytime.

Another misconception corrected

Until my call with the FSA plan representative, I always thought that I needed to have sufficient funds in my FSA to pay for any claims.

For example, in February, I wanted to use my FSA debit card to pay for a $200 dental bill, but as of the end of January, only $85 in pretax contributions had been deducted from my paycheck.

The representative assured me that I can start making claims up to my 2026 full-year FSA contribution of $1,000 even if the money isn't in the account yet.

That's because the FSA provider (and my employer) assume I'll continue to work there the entire FSA plan year. If I leave my company midyear with claims that are higher than my actual contributions, I will have to reimburse my employer out-of-pocket for this overage.

Conversely, if I leave with unused contributions remaining in my FSA account, I'll have to forfeit them.

That's fair. Unlike HSAs, contributing to an FSA can be a bit of a gamble. You have to calculate the risk of possibly losing what you've contributed if your health care costs are minimal during a plan year.

That's why you should avoid the mistake I made when I enrolled and carefully estimate what your qualified health care costs will be for the plan year — because you can't change your contribution amount when the enrollment period ends.

And it's important to know which provisions — if any — your employer allows to help you potentially avoid losing unused FSA funds.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Open enrollment is an important time for employees to review and select benefits and those decisions can have a lasting impact on your financial future.

According to the U.S. Bureau of Labor Statistics, the average employee benefits package accounts for 29.7% of total compensation for private industry workers and 38.4% of total compensation for state and local government workers.

But when the average employee has to choose from more than a dozen benefits, it is easy to become fatigued while working through the open enrollment process. The steps that follow will help keep you on track.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

1. Review your current benefits

Start by evaluating your existing benefits. Consider what worked well in the past year and what didn't.

Look at your health care usage, out-of-pocket costs and any changes in your circumstances — such as marriage, the birth of a child or new health needs — that may influence your choices. Try to judge how much the upcoming year's expenses may look like this year's.

A tool that may help is "start, stop, continue." Try to decide what benefits were missing this year that you would like to start in the new year, what benefits were not used that you might stop and what benefits were helpful that you want to continue.

This exercise can help you group your benefits by category.

2. Attend informational sessions and read materials

Keep an eye out for emails and other communications that offer enrollment support. Your employer offers these resources because they want you to get the most out of your benefits.

Use your human resource team to help you manage your decision-making. Consider talking to HR with your partner, if applicable, to help your family get the most out of your benefits.

3. Compare plans carefully

When selecting, compare plan premiums, deductibles, copayments, coverage networks and prescription drug benefits. Use available online tools or calculators to estimate your annual costs based on anticipated health-care needs.

Try not to get overwhelmed. Start by thinking about how well this year's plan served you and your family. The complexity of plan comparisons makes relying on your HR team especially important.

Start by telling them what you liked and did not like about this year's plan.

4. Consider flexible spending and health savings accounts

Flexible spending accounts (FSAs) and health savings accounts (HSAs) offer tax advantages for medical and dependent care expenses. Review contribution limits and eligible expenses for each account and decide how much you should set aside for the coming year.

Remember that FSAs typically have a "use it or lose it" rule, so plan your contributions carefully.

And don't let the acronyms confuse you. Perhaps think of your FSA as your "fast" account that generally has to be spent in the year it is funded and think of your HSA as your potential "hold" account which can be saved, if not needed, year-over-year and even invested subject to certain conditions.

5. Evaluate supplemental benefits

Beyond core health insurance, many employers provide added benefits such as life insurance, disability coverage, legal assistance, and wellness programs. Assess your need for these supplemental benefits and consider increasing coverage to suit your needs.

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Benefits you have to pay for are a bit like subscriptions for services, such as streaming. Individually they may not seem expensive, but when combined they can be expensive.

6. Plan for retirement

Open enrollment is a great time to review your retirement savings strategy. Check your contribution rates to your workplace savings plan if you have one.

A best practice to consider is to at least contribute enough to get the maximum company match. Another is to increase your contributions steadily to at least 10%.

Other questions to consider include whether to use a pre-tax contribution or a Roth contribution, if offered.

The former allows money to be contributed pretax and comes out as taxable income when withdrawn, while the Roth is made up of after-tax contributions and comes out as tax-free when withdrawn, subject to certain conditions.

Although company contributions will most likely be taxable when withdrawn, having tax-free Roth dollars in retirement may still be beneficial.

7. Understand deadlines and take action

Be aware of open enrollment start and end dates, and submit your selections before the deadline. Late submissions may result in missed coverage or defaulting to less optimal plans.

Because benefits decisions may impact your take home pay it is best to complete the forms with your partner. Completing the process early and sleeping on your decisions before final submission is another good idea.

8. Seek advice if needed

If you're unsure about which options are best for you and your family, consider consulting with benefits specialists or financial advisors. They can help you understand complex plan terms and make choices that align with your goals.

This is particularly true if you have special circumstances, such as a family member with a chronic condition.

A final note on AI

Open enrollment season is your annual opportunity to tailor your benefits to meet your evolving needs. By reviewing your current coverage, attending informational sessions, comparing options and acting early, you can ensure you're maximizing the value of your employee benefits.

You could also try using AI for guidance, whether by uploading plan documents to a chatbot and asking it to summarize them, or simply by asking it questions. AI isn't foolproof, however, so be sure to verify any information you've been given with your HR team.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Beware the Ides of March. The FSA grace period extends through March 15, 2024.

Some employers offer a Flexible Spending Account (FSA), enabling employees to contribute to a personal fund to pay for out-of-pocket healthcare or dependent care expenses. These tax-advantaged funds have an expiration date; you typically must use most or all of the FSA money in your account by the end of the 12-month plan period. About 36% of all FSAs allow a grace period to spend any remaining funds.

This grace period extends the 12-month plan year by 2 ½ months. So, for a plan year that started on January 1, 2023, you have until March 15, 2024, to incur eligible expenses and receive reimbursement.  Any unused balance at the end of the grace period will be forfeited.

An FSA grace period is different than a carryover balance

A "grace period" differs from an "FSA carryover" provision, used by about 40% of FSA plans. Carryovers allow you to spend a maximum of $610 of unused healthcare FSA balances from 2023 to 2024. Carryover amounts do not have a use-by date and are added to your account balance.

Carryover amounts may be deposited to a limited-purpose FSA (primary use dental and vision) versus a standard FSA if you are enrolled in a high-deductible health plan. That way, the carryover amounts won’t prevent you from contributing to your Health Savings Account (HSA). 

How to use your remaining 2023 FSA balance

Wondering how to deplete your 2023 FSA balance? In addition to some simpler ways to spend FSA money, you should probably think about expenses you may have overlooked. These items are generally "those that most people don’t incur, that require a letter of medical necessity, or that have very specific conditions under which they are reimbursable,” said Sara Taylor, senior director of Employee Spending Accounts at WTW. 

Ms. Taylor also shared with Kiplinger some commonly overlooked expenses, including the following.

• Capital expenses such as installing an entrance ramp or adding handrails or grab bars to a home to support a disabled condition
• Guide dogs/service animals
• Resident costs and fees for intellectually and developmentally disabled persons who require a special home
• Lodging or transportation expenses, such as mileage and parking for travel to receive medical care

In addition to reviewing receipts and your explanation of benefits (EOB), employees with a grace period may also incur additional medical expenses until March 15, 2024. Ms. Taylor explained that employees "could do this by scheduling additional necessary medical visits, ordering new contact lenses" or purchasing over-the-counter medications and first aid supplies. Sites such as FSAstore.com and HSAstore.com make it easy to spend those last few dollars and stay in compliance with plan rules. 

How much should you put in your FSA during open enrollment this fall?

If you put too much in your FSA last year, there are ways to estimate better what your expenses will be and how much to contribute to your FSA. “Start by looking at how much you spent out-of-pocket on healthcare the prior calendar year," suggested Ms. Taylor. "Then determine if that year was a high, low or average spend year and adjust accordingly. If that’s too overwhelming, focus your attention on a few areas — prescription drugs, dental, vision and the one or two people in your family that use health care the most.” 

And don’t overlook the human resources department at your job for guidance. “Many employers provide online modeling or calculator tools that employees can use to estimate expenses and determine how much to contribute to the FSA” added Ms. Taylor. 

From bandages to braces, you can set aside as much as you plan to spend on qualified health expenses next year, as long as it’s within your FSA maximum contribution limit. No matter how much you set aside, starting an FSA is a smart way to pay for health expenses for you and your family. 

• What Are the FSA and HSA Contribution Limits for 2024?
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Another retailer has entered the telehealth market with the launch of Walgreens Vrtual Healthcare, a service that offers chat visits for $33 and video visits from $36 to $75 to be paid out-of-pocket.

Currently available in nine states, you can consult with a doctor or nurse practitioner about common ailments such as acne, seasonal allergies, urinary tract infections, birth control and emergency contraception, and quickly receive a diagnosis and prescription, Walgreens said. Most visits are available to patients 18 to 64 years old.

Insurance for the virtual visits will not be accepted at this time but it can be used to cover prescription costs, Walgreens said. The plan, however, is to eventually accept insurance, flexible spending accounts and healthcare savings accounts, the retailer added.

At present the service is being offered in California, Florida, Georgia, Michigan, Illinois, Nevada, North Carolina, Ohio and Texas. Walgreens said it intends to roll it out to other states shortly. Urgent care service is not yet available in Michigan, it added.

Telehealth gains momentum

Other newcomers to the telehealth space include Amazon and Costco.

Earlier this month, Amazon’s One Medical unit launched an on-demand virtual health care service priced at $9 per month or $99 annually for Prime members, with no additional costs for receiving care. Prime members can also add up to five additional members for $6 per month or $66 annually.

And in late September, Costco announced a partnership with healthcare marketplace Sesame. Costco members can receive discounted pricing on a range of services, including virtual primary care for $29 and virtual mental health therapy for $79.

How it works

To get started using Walgreens Virtual Healthcare, you'll need to visit the company's dedicated website, complete an online intake form and make a payment. From there, you'll be connected with a clinician and can begin a chat.

Walgreens said that if you need treatment, you can either arrange to pick up your prescription in a store or have it delivered.

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The growth in popularity of Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) has grabbed the attention of three of the biggest delivery service apps — DoorDash, Instacart and Uber.

DoorDash and Instacart each recently announced plans to accept HSA and FSA payments for eligible items at select merchants this year, and Uber said it plans to begin accepting FSA payments in 2024.

“From over-the-counter medication and home healthcare equipment to COVID-19 test kits and family planning items, HSA and FSA payments allow consumers to conveniently and affordably shop for the products they need from the merchants they trust,” said Fuad Hannon, DoorDash vice president of New Verticals, said in making the announcement.

To get started with the new feature, DoorDash users need to:

• Go to the DoorDash Account tab and navigate to the Payment Methods section. 
• Select HSA/FSA under the Add Payment Method and input your information.
• You can now shop for eligible items. When you’re ready to checkout, you’ll see the HSA or FSA debit card payment option, where you should select ‘use card.’
• For more information, visit Using your HSA or FSA debit card on DoorDash.

Also, now through November 24, DoorDash customers can get 30% off eligible health orders of $25 or more — up to $12 off — at select stores by using the promo code HEALTH30 at checkout. 

How to use HSA and FSA cards at Instacart

Instacart plans to begin to accept FSA and HSA cards at checkout on December 4. 

The company has aggregated FSA- and HSA-eligible items across its platform into a single virtual storefront, the FSA & HSA Shop. Eligible FSA and HSA items will be labeled, the company added.

Instacart also said it plans to launch the Instacart Health Wallet in coming months. The wallet will allow customers to apply certain benefits to eligible items in their shopping carts in a single order.

Uber to accept SNAP, FSA in 2024

Uber announced in its third-quarter earnings results that, starting next year, SNAP recipients will be able to buy groceries on the Uber Eats app. The company said it will also begin accepting Managed Medicaid and Medicare Advantage plan benefits, including FSA Cards, Flex Cards and relevant waiver payments.

HSA and FSA limits for 2024

Meanwhile, the IRS recently announced record-high HSA contribution limits for 2024, including a $4,150 limit for individuals, as Kiplinger recently reported. The FSA contribution limit for 2024 is $3,200. For help with the differences between HSAs and FSAs, check out Health Savings Account vs. Flexible Spending Account: Which Is Better for You?

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The National Mediation Board (NMB) has denied the Association of Professional Flight Attendants (APFA) union's request to be released from negotiations with American Airlines, a move that sends both parties back to the negotiating table.

The union made a filing with the NMB in April and cannot strike until the NMB releases it from mediation and following a 30-day cooling off period.

The NMB’s next mediation session with American Airlines and the APFA is scheduled for December 12 to 14. If a “realistic” proposal is not provided by American Airlines, the APFA said it will issue another request to be released from the negotiations.

The APFA, which represents more than 26,000 American Airline flight attendants, is seeking wage increases and other provisions including boarding pay and improvements to its 401(k) plan and profit sharing benefits.

AFPA National President Julie Hedrick recently told Kiplinger in an emailed statement that the union will intensify its pressure on the airline.

“Rather than do the right thing for the flight attendants, American Airlines is attempting to drag out bargaining with inferior contract proposals while their employees suffer,” Hedrick said. “For far too long, airline management has exploited workers, funneling profits into their own pockets, as recently evidenced by American management's recent bonus and incentive program, which excluded their frontline workers.”

An American Airlines spokesperson said in an emailed statement that the company looks forward "to continued negotiations with APFA and reaching an agreement our flight attendants have earned."

In talks since December 2019

The APFA has been in negotiations with American Airlines since its contract became amendable in December 2019. The union is seeking wage increases and other provisions, including boarding pay and improvements to its 401(k) plan and profit sharing benefits.

In August, members of the APFA cast a nearly unanimous vote to authorize a strike should their ongoing contract negotiations with the airline’s management break down. The vote is an important step because it allows the union’s negotiations team to “return to the bargaining table with a clear message to management that American Airlines flight attendants are fired up and ready for our contract,” the APFA said at the time.

Holiday travel period is underway

The news comes as the busy holiday travel period is underway and there are still travel deals to be had. Whether you're looking for the cheapest countries to travel to or for bargain vacations off the beaten path, here are 24 travel websites to help you find deals and save money.

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There's almost always a tax angle whenever you face a major turning point in life, even if it seemingly has nothing to do with taxes. That's because taxes are always lurking in the background when life's biggest moments arrive. Going to college, getting married (or divorced), buying a home, retiring, and even dying – they all can impact your taxes. So, it should come as no surprise that there are even potential income tax implications for women who make the difficult decision to have an abortion. But now that Roe v. Wade has been overturned, new questions are popping up about those abortion-related tax consequences.

While the tax laws haven't changed since the U.S. Supreme Court reversed Roe v. Wade, women want to know if they can still take advantage of the tax breaks that help pay for an abortion. Some employers are also promising to cover the travel costs of workers who cross state lines to get an abortion. Will that increase the employee's taxable income? And what about contributions to organizations either supporting or opposing a woman's right to an abortion – can you still deduct those donations?

While taxes certainly aren't front of mind for women considering an abortion, these tax issues will ultimately impact the financial well-being of many women who decide to have the procedure. They may also affect the ability of advocacy groups on both sides of the abortion debate to persuade lawmakers to support their position. Other tax questions may bubble up as the legal landscape around abortion evolves but, hopefully, having answers to some of the current tax questions surrounding abortion will help women considering an abortion chart a course that works best for them.

Will the Costs of an Abortion Still Be Deductible as a Medical Expense?

If you itemize deductions on Schedule A (i.e., don't claim the standard deduction), you can deduct unreimbursed qualified medical expenses for yourself, a spouse and your dependents to the extent the total amount exceeds 7.5% of your adjusted gross income. However, only the costs of a legal abortion are qualified medical expenses for purposes of this tax deduction.

Before the repeal of Roe v. Wade, abortions were legal in all 50 states and the District of Columbia – although states could impose certain restrictions on the procedure. As a result, the costs of an abortion were generally deductible regardless of where in the country they were performed (assuming the other requirements for the medical expense deduction were satisfied). However, the legality of abortions will now be determined on a state-by-state basis – unless a federal law protecting abortion nationwide is enacted or a constitutional amendment doing the same is adopted, which in both cases is highly unlikely any time soon given the political polarization in the country right now. Therefore, going forward, expenses for an abortion will be deductible if the procedure is performed in a state where it's legal, but not deductible if it's performed in a state where abortion is illegal. (And note that determining if an abortion is legal in any particular state – or to what extent it's legal – may be tricky in certain states, especially when the use of abortion pills is considered.)

If a woman travels from one state to another to receive a legal abortion, some of her travel expenses may also be deductible in addition to the direct costs of the procedure (e.g., the doctor's fee). For instance, you can deduct amounts paid for transportation to and from an out-of-state abortion clinic. This includes bus, taxi, train, or plane fare. If you use your own car to travel for an out-of-state abortion, you can deduct your actual out-of-pocket expenses – such as the cost of gas, oil, and tolls – or you can elect to use the standard mileage rate for medical travel. (For 2022, the medical mileage rate is 18¢ per mile for the first half of the year and 22¢ per mile for the second half.) Expenses for travel within a single state to receive a legal abortion may also be deductible.

Hotel expenses can also be deducted, but not more than $50 per night. However, a woman traveling to get a legal abortion can also deduct lodging expenses for a person traveling with her. For example, if a woman's partner is traveling with her, up to $100 per night can be deducted for lodging.

Meals while traveling aren't deductible unless they're part of the inpatient care at a hospital or similar medical facility.

Can You Still use HSA, FSA, or HRA Funds to Pay for an Abortion?

Millions of Americans use health savings accounts (HSAs), flexible spending accounts (FSAs), and Health Reimbursement Arrangements (HRAs) to pay for medical expenses. There are several tax advantages that go along with these accounts – such as tax-free withdrawals if the money is used to pay for qualified medical expenses.

The definition of a qualified medical expense for HSA, FSA, and HRA purposes is the same as the definition for purposes of the medical expense deduction. As a result, tax-free payments from HSAs, FSAs, and HRAs are only allowed for legal abortions. And, as discussed above, that's now going to depend on state law.

Transportation and lodging expenses (up to $50 per person for lodging) can also be paid for with HSA, FSA, or HRA funds. So, women traveling from a state that doesn't allow abortions to one that does can still take advantage of tax-free withdraws from these accounts to pay for abortion-related travel expenses.

Will You Have Taxable Income if Your Employer Covers Your Travel to Another State for an Abortion?

Since the Supreme Court invalidated Roe v. Wade, many businesses across the country have promised to cover travel expenses for employees who go to another state to get a legal abortion. However, depending on how this is implemented, the employee could end up with additional taxable income.

If abortion-related travel expenses are covered by the employer's health insurance plan, then the employee would only be taxed on any amount that exceeds the limits on qualified medical expenses for purposes of the medical expense deduction. So, for example, any hotel expense greater than $50 per night per person that's covered by the employer's health plan could be treated as taxable income for the employee. Covered automobile transportation expenses that are greater than the actual travel costs or the medical standard mileage rate could also be treated as taxable income.

There may be limits on an employer's ability to cover travel expenses through its health plan, though. Several states currently restrict coverage for abortion-related expenses, and more states could join the list. Plus, covering abortion-related travel costs through a workplace insurance plan only helps workers who are eligible for and actually enrolled in the plan – which means some female employees will be left without the intended benefits. As a result, some employers might try to cover their employees' abortion-related travel costs by simply reimbursing workers for their expenses (likely requiring receipts from the employee to substantiate the amount). While the limits associated with coverage through a health care plan wouldn't necessarily apply, the reimbursed amount would be treated as taxable income for the employee.

Having taxable income shouldn't necessarily dissuade an employee from taking advantage of a reimbursement plan, but she should realize in advance that it could increase her income tax bill.

Can You Deduct Donations to Pro- or Anti-Abortion Organizations?

The Supreme Court certainly reignited the abortion debate when it overturned Roe v. Wade. For years to come, there will be intense efforts to persuade lawmakers across the country to either protect abortion options or eliminate them – especially at the state level. Individuals will surely reach out to their own representatives to voice their opinions, but most of the concentrated pressure will come from organizations set up to advocate and lobby for one side or the other. And, of course, those organizations will need money – much of which will come from contributions by ordinary Americans.

But will individual donations to the advocacy organizations still qualify for a charitable tax deduction now that Roe v. Wade was reversed? Yes. As long as the IRS authorizes the organization to accept deductible donations and you satisfy all the deduction's other requirements (including that you itemize deductions on your tax return), then you can still write-off your donations to these groups. The fact that a constitutional right to an abortion is no longer recognized doesn't change how the deduction works or who can claim it.

Tax Tip: Use the IRS's online Tax Exempt Organization Search tool to see if an organization is eligible to receive tax-deductible donations.

State Tax Changes After Roe v. Wade

Keep an eye out for state tax law changes where you live, too. For example, since Roe v. Wade was overturned, the Georgia Department of Revenue announced that it will recognize any unborn child with a detectable human heartbeat as eligible for the state's dependent exemption. That exemption is equal to $3,000 for each unborn child.

Other states may provide other tax breaks for unborn children, pregnant women, or others as a result of the Supreme Court's action.

According to the IRS, COVID-19 home testing kits are an eligible medical expense under the tax code. Personal protective equipment (PPE), such as masks, hand sanitizer and sanitizing wipes, are also eligible medical expenses if they're used primarily for preventing the spread of COVID-19. That means taxpayers who itemize can deduct the cost of home testing supplies and PPE to the extent their total eligible medical and dental expenses exceed 7.5% of their adjusted gross income (AGI).

For example, suppose you buy a home COVID-19 test kit for $75 and $50 worth of PPE this year. You also have another $4,875 of medical expenses for a total of $5,000 in eligible medical and dental expenses. If your AGI is $50,000, the first $3,750 of your medical and dental expenses are not deductible ($50,000 x 7.5% = $3,750). But you can deduct the remaining $1,250 ($5,000 – $3,750 = $1,250).

In addition, as eligible medical expenses, you can pay for COVID-19 home testing kits and PPE with money in a health flexible spending arrangement (health FSA), health savings account (HSA), health reimbursement arrangement (HRA), or Archer medical savings account (Archer MSA).

Also note that only unreimbursed expenses count as eligible medical and dental expenses. So, if you're reimbursed for expenses you originally paid, you must reduce the total amount of your expenses by that amount when claiming the medical expense deduction. Likewise, if your insurance company pays for part of your expenses and you pay the rest, you can only deduct the amount you paid.

Whose Medical Expenses Can You Deduct?

You can deduct COVID-19 home test kits and PPE you purchase for yourself and certain other members of your family. Under the tax law, you can deduct medical and dental expenses you paid for anyone who was one of the following either when the medical or dental services were provided or when you paid for them:

• Your spouse;
• A dependent you claim on your tax return;
• Your child whom you don't claim as a dependent because of the rules for children of divorced or separated parents;
• A person you could have claimed as a dependent on your return, except that he or she received $4,300 or more of gross income or filed a joint return; and
• A person you could have claimed as a dependent, except that you, or your spouse if filing jointly, can be claimed as a dependent on someone else's tax return.

Under these rules, you may even be able to deduct the cost of a COVID-19 home test kit or PPE for your parents. For example, if you provide over half of your mother's support but can't claim her as a dependent because she received wages of $4,300 or more during the year, you can still deduct any eligible medical expenses you paid for your mother if all other requirements are met (e.g., medical expenses exceed 7.5% of your AGI, etc.).

You probably never heard of COVID-19 when you picked this year's health insurance policy at work. You couldn't have planned for the coronavirus pandemic when you signed up for a 2020 flexible spending arrangement (FSA), either. But you might not be stuck with the choices you made in 2019 with respect to employer-provided health insurance and FSAs for 2020. That's because the IRS is letting workers make mid-year changes to their health insurance coverage and FSAs. It's also expanding FSA rules concerning carryover and grace periods.

But there's a catch: You can only take advantage of the new rules if your employer modifies its benefit plans. If your company doesn't want to make the necessary changes, then you're out of luck. But assuming your bosses are on board, here's a rundown of the mid-year health insurance changes allowed, the enhanced rules for FSAs, and even some adjustments that help people with health savings accounts (HSAs). Hopefully, the added flexibility will help if you're dealing with unexpected medical and dependent care expenses because of the coronavirus outbreak.

Normally, you can't change your employer-provided health insurance coverage during the year unless there's a qualifying "life event," such as a marriage, divorce, birth or adoption of a child, death of a covered family member, child turning 26, move to a new home, or change of employment status within the family. However, for many workers, the health insurance they signed up for last year isn't sufficient to handle unanticipated medical expenses linked to the coronavirus.

To help alleviate the problem, the IRS is allowing employers to modify their health benefit plans so that workers can make certain mid-year changes to their 2020 health insurance choices. Changes are only allowed on a prospective basis. Specifically, an employer, in its discretion, can amend its health plan to allow each employee to:

• Sign-up for health insurance now if he or she initially declined coverage;
• Sign-up for a different health plan (including changing enrollment from self-only coverage to family coverage); or
• Revoke existing coverage if the employee attests in writing that he or she is enrolled, or immediately will enroll, in another health plan not sponsored by the employer.

An employer is not required to allow all (or any) of these changes. It can pick and choose which of these new elections to offer. An employer can also limit health insurance changes to those that would increase or improve a worker's coverage (e.g., by electing to switch from self-only coverage to family coverage, or from a low-option plan covering in-network expenses only to a high-option plan covering expenses in or out of network).

Workers can also make mid-year changes to their health and dependent FSAs – again, if their employer modifies its FSA plan. Thanks to the IRS's blessing, employers can allow workers to:

• Sign-up or revoke an election to contribute to a health or dependent care FSA for 2020; or
• Increase or decrease the amount contributed in 2020 to a health or dependent care FSA.

As with mid-year changes to health insurance plans, employers can allow one, both or no changes. They can also limit mid-year elections based on FSA amounts that are already reimbursed.

Changes to FSAs are only permitted on a prospective basis, though. So, for example, you can't get back a contribution you already made.

FSAs generally operate under a "use-it-or-lose-it" rule: Use money contributed during the year to pay for qualifying expenses incurred that year or forfeit the unused funds. However, for health care FSAs, an employer can bend that rule a bit and allow workers to carryover up to $500 of unused contributions to the next year.

Employers now have the option of upping the carryover amount for 2020 FSAs to $550. This doesn't apply to amounts carried over from 2019 to 2020, though.

In addition, the carryover amount will be adjusted for inflation going forward.

Another way an employer can tweak the "use-it-or-lose-it" rule is by providing a grace period of up to 2½ months to incur health or dependent care expenses for the previous year. For example, if an employee had unused FSA funds at the end of 2019, the employer could allow the worker to use the money to pay for qualifying health or dependent care expenses incurred from January 1 to March 15, 2020. For health FSAs, an employer can adopt a carryover or a grace period (or neither), but it can't adopt both features.

For 2020, the IRS is letting employers extend the grace period to the end of the year. Again, it's optional, though. So, for example, if an employer sponsored a 2019 FSA with a grace period ending on March 15, 2020, it could amend its FSA plan to let workers to apply unused 2019 FSA funds to pay for qualifying expenses incurred through December 31, 2020. However, health FSA amounts can only be used for medical care expenses, and dependent care FSA amounts can only be used for dependent care expenses.

The extension of time for incurring claims is available to both FSAs that have a grace period and FSAs that offer a carryover.

Note, however, that a worker who had unused amounts from a 2019 health FSA and who is allowed an extension to the end of 2020 to incur expenses generally will not be allowed to contribute to a health savings account (HSA) during the extended period.

On March 11, the IRS announced that anyone with a high-deductible health plan (HDHP) covering coronavirus testing and treatment before plan deductibles have been met can still contribute to a health savings account (HSA) and deduct those contributions on their 2020 tax return. (For details, see Free Coronavirus Testing and Treatment Won't Affect HSA Deduction.) The IRS has now clarified that this applies to coverage of testing and treatment expenses for all of 2020 (not just since March 11).

The IRS also expanded the list of coronavirus testing and treatment that an HDHP can cover without a deductible or with a deductible below the minimum annual deductible otherwise required. First, it added the panel of diagnostic testing for influenza A & B, norovirus and other coronaviruses, and respiratory syncytial virus (RSV), and any items or services required to be covered with zero cost sharing. It also included telehealth and other remote care services. Therefore, for example, an otherwise eligible person covered by an HDHP who was reimbursed for these tests and services before satisfying the HDHP's required deductible will still be allowed to contribute to an HSA in 2020.