Know how much you spend on health care in an average year? If not, you're hardly alone. In fact, the vast majority of people have no idea how much they spent last year, let alone last month. Yet medical costs are critical and need to be tracked closely. There are several reasons why.
Tax deductions Did you know that all health expenses exceeding 7.5 percent of your gross income can be claimed as deductibles? Better yet, this provision covers insurance premiums, co-payments and even prescription medicines. That means if you make $60,000 and spend more than $4,500 on medical expenses, you can deduct these expenses from your income. If you or a family member suffers a major illness, it could be a budget-saver at tax time. Of course, you need to keep precise records and hang on to all your receipts, just in case the IRS comes knocking.
Legal reasons If you're ever involved in an automobile or work-related accident, your medical fees may be covered by the other party's insurer. If a lawsuit results, the courts will want to know exactly how much loss you incurred. Whether you get full coverage right away or end up going to court, it's important you keep up with your costs. There's nothing worse than not being able to back up a claim.
Reimbursements If you are overcharged for a service or treatment, you can usually get your money back. If you need to file a claim, though, be forewarned. Your insurer will want some hard evidence. Don't count on the doctor's office to do the paperwork either. It may be up to you to settle the matter on your own. If it comes to that, you'll want to have as much documentation as you can.
Health budgeting If you have a special savings account tied to your policy, knowing how much you spent last year can help you prepare for the coming one. At the very least, it can help you avoid depositing too little or too much. And if you have individual coverage and can prove that your health costs are low, you may even be able to negotiate yourself a lower rate.
How to do it Tracking your health costs needn't be elaborate or complicated. You can do it with a basic spreadsheet or even in a ledger or notebook. If you do want to go the high-tech route, though, there are plenty of software packages on the market that can help you out.
However you choose to track your expenses, you should also:
Keep all receipts in a convenient location Make sure each one is dated Note the reason for each expense Add everything up at the end of the year to see if you qualify for a deduction Keeping track of your spending may seem awkward at first, but thankfully it isn't hard to do. If you can get in the habit of being your own bookkeeper, you'll be glad you did it later on.
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