Qualified medical expenses under a Section 105 plan include amounts paid for the diagnosis, cure, treatment, or prevention of disease, or for affecting any structure or function of the body. Qualified expenses also include any relevant transportation to receive medical care. Lodging expenses up to fifty dollars per day to receive specialized care in a specific location are reimbursable, so long as there is not a vacation element to receiving the medical care in that location.
A Section 105 plan can also include qualified long-term care services. Specific yearly premium amounts that are fully deductible using Section 105 plans include the below:
- 40 years old or less: $200 per year
- Between 40 and 50 years old: $375 per year
- Between 50 and 60 years old: $750 per year
- Between 60 and 70 years old: $2,000 per year
- More than 70 years old: $2,500 per year
Typical medical expenses that can be reimbursed through a Section 105 plan include health insurance premiums, deductibles, physician fees, prescription costs, dental care fees, vision care fees, chiropractor fees, psychiatric care fees, hospital bills, laboratory fees, orthodontics costs, and medical supplies costs. Also included are acupuncture, capital expenses to modify the home for a disability, hearing aids, laboratory fees, nursing home and services, smoking cessation programs, substance abuse treatment, therapy, transplants, wheelchairs and X-rays.
Expenses that are not reimbursable through a Section 105 plan include babysitting services for a healthy child, controlled substances that are not legal under federal law, cosmetic surgery that does not treat a disease or correct a disfigurement, dancing or swimming lessons, diaper services, electrolysis or hair removal, funeral expenses, future medical care, hair transplants, health club dues, household help, medicines or drugs that were imported from other countries, nonprescription drugs and medicines, nutritional supplements, personal use items (such as toothbrush and toothpaste), teeth whitening, veterinary fees, or weight-loss programs.
Let’s look at an example of Jane, who spends $10,000 in 2018 on medical-related fees, indicated below:
- $5,000 Medical Premiums
- $500 Prescriptions
- $250 Co-pays for physician visits
- $250 Nutritional supplements
- $1,000 X-ray to diagnose a back injury
- $1,500 Dental crown
- $500 Teeth whitening
- $750 Hair removal
- $250 Gym fees
Jane may be reimbursed for $8,500 of these expenses. Teeth whitening, hair removal and gym fees are non-qualified medical expenses under Section 105 plans and cannot be reimbursed on a tax-free basis.