Eye Surgery Cost Can Be Covered by Health Savings Account: 2023-24 Update

The IRS has announced significant increases in the amount of money account holders can contribute to their health savings accounts (HSA) for the tax year 2024, which can be a real financial benefit to those looking at LASIK eye surgery costs. The news leads to two questions:

• Does the IRS consider LASIK and other forms of vision correction surgery such as SMILE, PRK, or ICL as qualified expenses for HSAs?

• How much can an individual or family contribute to a health savings account?

The good news is vision correction procedures – including LASIK, SMILE, ICL, and others – are considered qualified medical expenses by the IRS and, therefore, can be used with funds set aside in an HSA or a flexible savings account, known as an FSA.

Using HSA or FSA Funds Saves Money on LASIK, SMILE, or ICL Eye Surgery Cost

The funds in these tax savings accounts are set aside directly from your paycheck – before taxes are taken out. Not only do you not pay taxes on the funds in the accounts, but the amount in the account is deducted from your gross income – lowering your overall tax exposure. The savings can quickly add up given the majority of taxpayers fall in the 10 – 22 percent tax brackets, just for federal tax alone. Most states – except California and New Jersey – also forgo taxing the funds in these accounts, which means even more savings. In addition, any interest earned on the funds in these accounts is also tax-free.

How Much Can I Contribute to an HSA or FSA?

The IRS announced another significant increase in contribution limits for HSAs in 2024: $4,150 for individuals and $8,300 for families. The 2024 contribution limit increase for individuals is the largest on record – more than $300 over the 2023 limit. HSAs are particularly useful for qualified medical expenses like vision correction surgery because the funds can be rolled over from year to year, allowing account holders to save up for a vision correction procedure. Importantly, according to noted finance personality David Ramsey: “Contributions to your account stay there until you use them. They roll over year after year and earn interest—you can even invest the money in your HSA to grow tax-free! This thing is like a health-savings machine!”

The IRS will announce the 2024 contribution limits later this fall. However, it will likely be an increase over the 2023 contribution limit of $3,050 with some experts projecting a 2024 limit of $3,200. Unlike HSAs, FSAs must be spent on qualified expenses within the calendar year, or risk losing the balance. There are exceptions, as some plans allow a small portion to be carried over in the following plan year.

If your employer offers an FSA program, you can use it in conjunction with your HSA to fund a vision correction procedure.

Want to Use Your Tax-Free Accounts for Vision Correction? Talk to Your Benefits Manager

With either FSA or HSA accounts, you can pay all or a significant amount of your LASIK, SMILE, or ICL procedure pre-tax.  You can learn more about the cost of vision correction procedures by visiting the LASIK, SMILE, and ICL pages. Importantly, when considering using your HSA or FSA accounts, talk to your company’s benefits manager who can let you know what the opportunities and limitations are for your specific plan.

Lastly, while figuring out how to pay for a vision correction procedure is important, the first and most essential step is to meet with an eye surgeon who specializes in vision correction procedures to determine which procedure is recommended for you, your vision, and lifestyle.