The IRS will only allow you to deduct medical expenses in excess of 7.5% of your adjusted gross income. In other words, the first 7.5% of your out-of-pocket medical expenses can’t be deducted from your income taxes. So, most of us do another little dance to try to save money on taxes. If you can PREDICT what your medical expenses will be for NEXT YEAR, and if your company offers a “Health Care Reimbursement Account (HCRA)”, you can save whatever the marginal rate is for your taxes by putting money aside for your medical expenses. If you happen to OVERESTIMATE, or MISCALCULATE, or just plain GOOF, you lose whatever you don’t spend on medical expenses for that year. I have never come up short (so far), but it has been close a time or two.

As we neared the end of 2006, my dentist told me that my daughter was “definitely going to need orthodontics treatment during 2007″, so we went to the orthodontist and found out how much our part of the expenses were going to be. Guess what? She wasn’t ready for treatment during 2007. I thought I was going to have to kiss about $2K goodbye. We managed to get her started on her treatment during the grace period in 2008, so I won’t lose the money. But it appears to have been a close call.

One of the really frustrating aspects of this is the paperwork. Correlating, collating, and analyzing bits and pieces of paperwork for a wife and three children is more work than filing my income tax return. I spent several despicable hours getting the flex claims filed for 2007. Thankfully, both the medical insurance and the dental insurance companies allow pulling copies of the “Explanation of Benefits” forms from online, so it isn’t as bad as it could be.

As I was contemplating this, I began to wonder why somebody can’t just write an interface to take the data from the EOB forms and just automatically file the Flex claims. Why should I have to do all that work? It should just happen automatically! Maybe someday they’ll get their act together and fix it to work that way. I’d rather audit the final results that file and track all of those claims!