What's double dipping?
Double dipping is when you:
Use your benefits account (like your HSA, FSA, or HRA) on a qualified expense
And either
Get reimbursed by your insurance
Refunded by a facility/store
Claim a tax credit/deduction for the paid expense (above)
Use another tax-advantaged account.
Double dipping could result in the disqualification of your benefits account, potentially subjecting your funds to taxes and penalties.
What not to do ⛔️
Pay a qualified expense with your health savings account or general health FSA and get fully reimbursed by your insurance
Spend your Dental & Vision FSA funds on a qualified expense and reimburse yourself with HSA funds for the same expense
Claim a dependent care FSA expense under the Dependent Care Tax Credit (DCTC)
If you get double reimbursement for an expense, the amount you receive in excess of the actual expense could be considered taxable income and must be reported when filing your taxes.
Claiming a tax credit or deduction for an expense already reimbursed may trigger penalties or further scrutiny by the IRS.
Avoid being audited or charged penalties by:
Being conscious of your expenses & reimbursements
Keeping receipts/invoices for qualified expenses, and
Making corrections as necessary.
Take full advantage of your benefits
While you cannot double-dip, you can still make sure that you take full advantage of your tax-advantaged accounts and tax credits/deductions.
What you can do ✅
If you were partially reimbursed for expenses by your insurance company, you can use your FSA to reimburse the uncovered portion as long as it is a qualified expense.
If your general health FSA is exhausted, you can claim a tax deduction for unreimbursed and qualified out-of-pocket medical expenses that exceed 7.5% of your adjusted gross income.
If you have exhausted your dependent care FSA for the year, you can claim further expenses under the Dependent Care Tax Credit (DCTC).
If you used up your Dental & Vision FSA on a qualified purchase and have a remaining balance to pay, you can use your HSA to cover the rest OR pay out of pocket and reimburse yourself with your HSA.
Always consult with a tax professional to ensure you're making the right money moves!
Source: Newfront "The FSA/HRA/HSA Double Dipping Prohibition and OTC Covid-19 Tests"