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Banking Umbilical Cord Blood
Cord Blood Banking Costs Deductible
Your umbilical cord blood banking costs may be tax deductible if used in treatment of a medical condition. The amount not covered by health insurance will be a deductible expense. Most child health insurance plans may not cover this cost - unless there is an existing health condition, and treatment is expected to improve your child's health, and the protocol is not deemed experimental.
When considering how to manage the projected costs of banking umbilical cord blood cells there are two important considerations that are addressed in detail below:
- Are the costs tax deductible - the answer depends on medical neccessity
- Which tax vehicle works best - most parents will find that their FSA works best for three reasons:
- ​First dollar tax savings
- Predictible nature of costs
- Hidden FSA savings
FSA Cost Savings Cord blood banking costs along with a wide variety of qualifying medical expenses may be paid using your FSA. You may save more money than by taking a Schedule A deduction. Find out the rules and many hidden benefits for growing families.
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First Dollar Tax Savings  Cord blood banking costs are relatively modest by themselves. Most couples won't see any tax savings unless they have other un reimbursed deductible expenses. Schedule A deductions provide no tax relief on the first 7.5% of your household Adjusted Gross Income (AGI). A Flexible Spending Account (FSA) provides first dollar savings, and may lower taxes in more ways.
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Banking Cord Blood Costs and Tax Deductions
Many growing families choose to pay for umbilical cord blood collection and storage when their infant is perfectly healthy. The costs associated with banking your infant's umbilical cord blood is like buying an insurance policy against future health risks. In these cases the expenses are not deductible as there is no underlying medical condition.
Where an existing medical condition is present, tax deductible expenses will fall into one of three categories:
- Insurance covers the cost - there may be leftover expenses from co pays, co insurance, etc.
- Cord blood deemed not medically necessary - the full amount may be a qualified medical expense
- Your child has no insurance coverage - the entire amount may be tax deductible
There are usually two fees associated with cord blood banking. The initial fee includes enrollment, collection and storage for the first year. The second is an annual storage charge. Initial costs will range from $900 to $2100. Annual fees beyond the initial storage charge are approximately $100.
First Dollar Tax Savings for Cord Blood
You have two options for your deductible umbilical cord blood banking costs. Cut these costs by 1/3 or more using a Flexible Spending Account (FSA). An FSA may save more money than taking a medical deduction using Schedule A. The cost of collection, transplantation, freezing, and storage of embryonic stem cells will be eligible for a tax deduction as long as a medical condition is present.
Using an FSA to pay for cord blood banking makes the most sense because of first dollar tax savings. Deducting these charges using Schedule A requires you to meet a deductible expense hurdle of 7.5% of Adjusted Gross Income (AGI). That amount climbs to 10% beginning in the 2014 tax year. Unless you expect to experience a very high level of other medical expenses, it is unlikely you will see any tax savings from cord blood collection and storage fees alone.
Using an FSA to pay for cord blood banking makes the most sense because of first dollar tax savings. Deducting these charges using Schedule A requires you to meet a deductible expense hurdle of 7.5% of Adjusted Gross Income (AGI). That amount climbs to 10% beginning in the 2014 tax year. Unless you expect to experience a very high level of other medical expenses, it is unlikely you will see any tax savings from cord blood collection and storage fees alone.
Predictable and Unexpected Deductions
Second, the costs are very predictable. You know exactly what needs to be paid and when. Many families are put off by the FSA use it or lose it rule. The predictable expenses minimize this concern.
Third, an pre-tax payroll deductions save you money in a variety of ways: FICA tax savings, and hidden tax savings associated with a lower reported W2 income can make a big difference. Always consult your tax adviser to determine the best approach for your family.
What if your employer does not offer a flexible spending account, and your cord blood costs don't tip your deductible expenses above your AGI threshold? Your family may not see any tax savings unless you can identify enough other qualified medical expenses. Your collection, banking and storage costs are only deductible if there is an underlying medical condition: either for your infant or another family member.
Chances are there will be other un-reimbursed medical expenses from insurance deductibles, co pays, co insurance, experimental treatments, out of network charges, etc. Find out about more qualifying expenses associated with growing families to improve your odds of tax savings.
Third, an pre-tax payroll deductions save you money in a variety of ways: FICA tax savings, and hidden tax savings associated with a lower reported W2 income can make a big difference. Always consult your tax adviser to determine the best approach for your family.
What if your employer does not offer a flexible spending account, and your cord blood costs don't tip your deductible expenses above your AGI threshold? Your family may not see any tax savings unless you can identify enough other qualified medical expenses. Your collection, banking and storage costs are only deductible if there is an underlying medical condition: either for your infant or another family member.
Chances are there will be other un-reimbursed medical expenses from insurance deductibles, co pays, co insurance, experimental treatments, out of network charges, etc. Find out about more qualifying expenses associated with growing families to improve your odds of tax savings.
