What Are Your Options For Funding (Or Financing) Dental Work?
If you are facing some extensive dental work over the next few years, or are concerned your child or adolescent may soon be in need of orthodontia, you may be wondering whether there's anything you can do to defray these upcoming expenses. While dental work can sometimes be costly, helping preserve the health and function of your teeth is one of the most important investments you can make in your overall health. Read on to learn more about some specialized accounts and credit options that will allow you to put aside the funding you need to pay for these expenses as they're incurred -- and in some cases, even get a bigger refund at tax time.
Health Savings Account (HSA)
If you have a high-deductible health plan (HDHP), you have the option to open an HSA and fund it through pre-tax deductions. If you have a single health plan, you can contribute up to $3,350 to an HSA -- tax-free -- each year, while those with family plans can contribute up to $6,550. If you're age 55 or older, you can chip in another $1,000 to whichever HSA plan you have.
All HSA contributions are fully deductible from your adjusted gross income, which is used to calculate your federal and state tax rates. This can add up to a significant savings -- if your highest marginal tax rate is 25 percent, you'll be able to save $25 in federal income taxes for each $100 you set aside in your HSA. There's also no expiration date on the funds in an HSA, and you can choose to save or invest these funds during times when you're not in need of medical care.
Most dental expenses can be paid using HSA funds, as long as the person incurring these expenses is covered under the HDHP to which the HSA is connected. Therefore, if you and your spouse have separate insurance policies and your child is covered under your spouse's policy, you may be prevented from using your own HSA funds to pay for your child's dental or orthodontic care.
Limited purpose Flexible Spending Account (FSA)
If you qualify for an HSA but aren't sure even the maximum contribution will cover your upcoming dental expenses, you may also qualify to contribute up to $2,500 in tax-free funds to a limited purpose FSA. These accounts are a bit more limited in scope than an HSA, and can only be used for dental and vision expenses that aren't covered by your primary dental and vision insurance plans (or all dental and vision expenses if you don't have these types of insurance). Unlike an HSA, they expire at the end of the plan year, and any unused funds will be relinquished.
Because of this, it's important to set aside only the funds you know you'll need for the following year. You may also want to spend down these funds first before tapping HSA funds. In most cases, you'll be able to use your FSA to reimburse yourself for expenses incurred during the plan year but paid the next year, but you'll want to check on this before the end of your plan year to confirm you're not leaving money unspent.
Dental credit
If you are facing dental expenses after the open enrollment period for your HSA or FSA, preventing you from using these tax-exempt funds to pay for care, another option may be a dental credit card or purchase plan. This financing is usually arranged through your dentist's office, and can offer you a line of credit with an interest rate lower than most credit cards or personal loans.
An advantage to these plans is that there's no wait for funds to accumulate with each paycheck -- you're able to pay the entire cost of your procedure up-front. Talk to your dentist to find out more about your options for financing necessary dental treatments.