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Flexible Spending Accounts and Celiac Disease by Dwight Senne

This article appeared in the Autumn 2004 edition of Celiac.coms Scott-Free Newsletter. It originally appeared in the book A Personal Touch On...™ Celiac Disease. ©A Personal Touch Publishing, LLC.

Celiac.com 10/27/2004 - For at least the last 15 years I have gone to several doctors with a host of various gastrointestinal disorders. The most common diagnosis I received was Irritable Bowel Syndrome. Finally, in May of 2003, I found a doctor who was thorough enough to check for Celiac Disease. I have been on the gluten-free diet ever since and feel wonderful!

When first diagnosed with Celiac Disease, I suppose I was like most people—overwhelmed by the magnitude of the lifestyle change associated with the gluten-free diet. Once reality set in and I began to accept and deal with this new diet, I experienced another overwhelming feeling—the high cost of gluten-free foods! While I was not on a tight budget, the idea of spending four times as much for a loaf of bread that was only half the size was daunting to say the least. I immediately began searching for ways to diminish this extra expense.

My research took me to the Internet, where I discovered that according to several IRS rulings (Revenue Ruling 55-261; Revenue Ruling 76-80, 67 TC 481; Cohen 38 TC 37; Van Kalb TC MEMO 1978 366; Flemming TC MEMO 1980 583), the cost difference between gluten containing food products and specialty gluten-free alternatives is tax deductible for Celiac patients. However, it didnt turn out to be that simple.

Further research revealed that only the portion which exceeds a 7.5% threshold of adjusted gross income for all medical expenses combined would be deductible. In English, that meant that if I had an income of $50,000, I would only be able to deduct my extra expense of gluten-free foods (and any other legally deductible medical expense) that exceeded $3,750 (7.5% of $50,000)! Well, gluten-free foods are not that expensive!

Knowing I would never reach that deductibility threshold, my search continued. Suddenly, a rare epiphany befell me. Since the IRS had ruled specialty foods that are medically necessary to treat a condition are deductible, it may follow that these same expenses may be reimbursable through my employers Flexible Spending Account program.

Basically, the Flexible Spending Account is a plan that allows you, the employee, to set up a separate savings account, usually administered by a third party. You decide at the beginning of the year how much to contribute to this account. The contributions are deducted from your payroll before tax (meaning you are not charged income tax on the portion of your income you put into the account). As you have out of pocket medical expenses, you file a claim from the Flexible Spending Account administrator for reimbursement of those expenses. Once the account is emptied, no further reimbursements are possible for that year. One caveat with these plans is that they are "use it or lose it," which means that if you do not have sufficient medical expenses equal to the amount contributed you will forfeit any unclaimed balance. Your human resources department should be able to tell you if your company offers a Flexible Spending Account.
In my case, I first called the human resources department at my place of employment to find out if indeed my rationale was valid. The response was "I dont know, but I doubt it"! Never one to take no for an answer (especially when preceded by "I dont know"!), I pressed on. A phone call to the Flexible Spending Account administration company yielded the answer I had hoped for—YES!

Fortunately, I happened to connect with a customer service representative who was extremely thorough and diligent. She had to put me on hold several times, but she finally found not only the answer I was looking for, but also the proper procedure for filing a claim. She sent me a worksheet that I now use to file any claim for gluten-free foods. The sheet has a place to list the food item, cost of the gluten-free variety, cost of the gluten-containing variety, and the price difference. I made several copies of the worksheet, so now whenever I file a claim, I just fill out a new sheet. The receipts for the food items I am requesting reimbursement for must be included each time with the worksheet. With my first claim, I also had to provide a letter from my doctor clearly stating I was diagnosed with celiac disease and that I must be on a gluten-free diet. They keep this letter on file, so I do not have to send it each time.

Generally speaking, any medical expense the IRS considers deductible (on Schedule A of your 1040 form) is reimbursable, however, employers are not obligated to follow those guidelines. They are not able to add other expenses that are not deductible, but they can delete certain ones (like gluten-free foods) if they choose. So it behooves you to check with your Flexible Spending Account administrator to find out what your plan covers and the proper procedure for reimbursement. It may be necessary to ask to speak to a supervisor, since not every customer service representative will be as helpful as the one I had. You may wish to cite the IRS rulings I listed earlier to convince them to accept this as a reimbursable item. This can also be helpful to convince them to reimburse gluten-free food items if they do not currently do so.

While it is still your money that is paying for the entire cost of gluten-free food, using the Flexible Spending Account to switch that money to the tax free variety can add up to significant savings. Depending on the amount of gluten-free food you are buying, and your tax bracket, it can easily be over $100 per year in tax savings!

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31 Responses:

 
Anne Marie Maggio
Rating: ratingfullratingfullratingfullratingfullratingfull Unrated
said this on
19 Oct 2007 7:23:43 AM PST
You are fabulous...as a parent of a type I diabetic with newly diagnosed celiac disease as well as a second child newly diagnosed with celiac I have been trying to financially navigate to find if there are any tax deductions available. We were informed that if you file your taxes with the gluten-free deductions you are red-flagging for an audit.

Thank you so much...my husband and I are so grateful for the information!

Anne Maggio

 
michelle
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said this on
25 Oct 2007 4:23:13 AM PST
I was diagnosed with celiac disease yesterday. I am a bit overwhelmed but having this site is like a safety net! Thanks so much Mr. Adams!

 
Diane Peterson
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said this on
10 Nov 2007 4:24:54 AM PST
How ironic that I should read this now as I just received in the mail yesterday an application for a flexible spending account plan from my employer. I will now check into this. Thank you for all your help. I too went through the same doctor routine for over 20 years and it was a horrible experience! I just had the genetic blood test last Monday and am waiting for results. It's pretty sad when you pray the results are positive but that will bring peace of mind to me and help out my family members who are also sick and in great denial. Thank you, you are a blessing! Diane

 
tsav
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said this on
01 Dec 2007 10:22:00 AM PST
Great information! If only I knew this last month when I decided how much to put in my flexible account. I wonder if it covers gluten free meals in restaurants?

 
Dorothy Burton
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said this on
13 Dec 2007 5:34:05 PM PST
What about people who are retired and on a fixed income. When my husband was put on this diet, I spent over $300 getting supplies and then had to insist that my doctor give him the blood test. His answer before that was 'I don't see how that can be' But he did the test and Carl has celiac disease.
Thank you . Dorothy Burton

 
an unknown user
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said this on
25 Dec 2007 8:28:02 AM PST
thank-you

 
Sue Petit
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said this on
02 Jan 2008 4:17:08 PM PST
Good information! Thank you.

 
Eddie Acevedo
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said this on
04 Jan 2008 6:52:12 PM PST
Thank you for the GREAT information. I also have Celiac and have Flexible Spending I will definitely look into this!!

 
Bobbi Kay Teall
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said this on
06 Jan 2008 3:01:41 PM PST
Just what I wanted to know...I have heard that you can keep track of the food you have to buy, didn't know how to go about it and since I am not working at this time I can make my own spread sheet. Thank you very much!!!!!

 
Judy Smith
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said this on
20 Jan 2008 4:02:07 PM PST
Great information!

 
Katherine Ulrich
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said this on
09 Feb 2008 9:15:02 AM PST
Wow! Though I am too old to work, and I have been ill for years before finally finding out what was wrong, now I can search for further help.

 
Julie Kelly
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said this on
09 Feb 2008 1:25:44 PM PST
So in the end, do you feel like it is worth it to do all that work to save 3-7% on the difference of each item ($1-3)? How much do you submit a year for gluten-free foods? The main reason I ask is that I have considered it myself but didn't feel like the amount would be worth my time. Thank you so much for all the information you put out there - you do a great job, and I send everyone I know with celiac questions to your site.

 
defallstead
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said this on
30 Aug 2009 1:49:39 PM PST
As a registered tax preparer with Type 2 diabetes and having a wife diagnosed last year with celiac this is great news. She has a flexible spending account through her job, and yes, when feeding a family of four with one diagnosed with chronic Lyme, one with Diabetes and one with celiac and one whose body aches and pains have yet to be diagnosed...every penny counts.

 
Hallie

said this on
16 Feb 2008 11:12:10 PM PST
I would really like to know whether this applies to Health Savings Accounts also. Someone should find out and post it here.

 
Laura Swift
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said this on
28 Feb 2008 6:10:28 PM PST
Good news for me! I will be asking questions tomorrow to the FS Admin. Thanks for an informative article.

 
Hallie

said this on
24 Mar 2008 11:57:34 AM PST
I need to know whether this holds true also for Health Savings accounts! Does anyone know?

 
Hallie
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said this on
24 Mar 2008 12:10:35 PM PST
While we are finding out whether celiac food items can be taken out of a health savings account, can we also find out whether the cost of celiac books, and cookbooks needed to re-educate oneself for purposes of grocery shopping, cooking, and eating, be taken off a health savings account? I read somewhere that celiac seminars might be taken off tax, so why not books which save the same vital purpose in helping the celiac patient know what he can or cannot eat?

 
Hallie
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said this on
24 Mar 2008 1:38:40 PM PST
I think I have answered my own 2 questions, above. I called the IRS. First I talked to ID#93-10948. She said that this would fall under the Pub. 502 weight loss provisions, and that the food would be deductible to the extent that it exceeds the normal cost of similar gluten-containing items. She said the additional mileage, and books would not be allowable. She was talking only about itemizing medical deductions, however. Then she turned me over to a specialist in Health Savings Accounts. He was ID #75-17224. He reiterated that the mileage and books issues would not be allowable, but disagreed about the gluten-free food. He said that special diabetic food which did not contain sugar was considered 'supplements', and that likewise special gluten-free food should also be similarly considered as supplements. Supplements are allowed 100% on a health savings account. No 'difference in price' calculation is needed.

 
Dwight Senne
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said this on
01 Apr 2008 6:09:46 PM PST
Thanks for the kind remarks about my article. To speak to the HSA question, yes, the same rules apply. Hallie, the IRS rep you spoke to who said 100% is deductible is misleading you! Do NOT follow his advice! Only the difference is what can be reimbursed under FSA and HSA. The process is much easier under HSA, as there are no forms to send in. Just keep a running total and save all receipts - then, from time to time, as you build up a balance, you can make a cash withdrawal from you HSA. Just be sure to have the records to back it up in case of an audit! Hope this helps!

 
Chico

said this on
05 Jul 2008 5:59:04 AM PST
Hello everyone I was just diagnosed with Celiac and would like to know where to begin in respect to a Health Savings Account. Also everywhere I look someone is charging for information. Please help.

Thanks

 
Stanzie Vendette
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said this on
11 Aug 2008 9:56:05 AM PST
One of my best friends and now my current boyfriend suffer from Celiac Disease and I would love to learn more about the disease and how to cook some tasty gluten free dinners for him.

 
maggie
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said this on
11 Aug 2008 1:58:53 PM PST
Thank you! I have money in my FSA and was hoping that this could work. This is a wonderful website!

 
Marilyn Perkins
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said this on
28 Aug 2008 1:35:14 PM PST
Excellent! I should have known this 25 years ago! Today it is of little value as I'm below tax paying income and retired. A great benefit to those out there purchasing gluten free foods. It adds up more when it has to be yeast free. Thanks for the information. I will be sure to pass it on.

 
Sarah
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said this on
09 Oct 2008 4:22:00 AM PST
Any advice for Australians? I don't think we get tax deductions here for gluten free food. Does anyone know any different?

 
Katie
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said this on
16 Nov 2008 6:29:10 PM PST
Excellent! I never knew about this deduction! I spend at least $600 extra on gluten-free food per year!

 
cecil grass
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said this on
09 Nov 2010 6:24:23 AM PST
Great article, thanks for sharing!

 
Teresa
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said this on
27 Dec 2010 10:54:06 PM PST
Any info that is more recent?
I used to spend $45/week on food. Now I'm spending more than twice that amount. Is this typical, am I being ripped off, or do I just not know how to put gluten free meals together? Is there anyway we can band together to get the prices of these items down? I used to love to cook and love to eat. All I ever craved was bread, pasta, pastry... all gluten. Now, I'm injured, and I'm celiac... I just eat to survive. I never ate PBJ. Now it's at least 3x/week on rice cakes. boring.

 
Solar
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said this on
06 Jan 2011 7:31:11 PM PST
I used to cook and bake wheat-based food all the time, too, and was devastated and depressed when I was first diagnosed. It gets better, though as you get used to the new way of eating. Now brown rice is the basis for most of our family meals. It's much healthier, even if a person doesn't have to be gluten-free, and it's much less expensive than regular bread and pasta. Even so, I spend WAY more than that on food at the grocery store. My favorite cookbooks are both small books by Hilda Cherry Hills. The magazine Living Without also has some really wonderful recipes for meals, snacks, desserts, etc. Enjoy!

Updated tax information would be helpful.

 
Diane Aragon
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said this on
01 Feb 2011 5:14:35 AM PST
I was just diagnosed with celiac disease and have had no symptoms except osteoporosis and depression. I am 68 years old. Had a blood test and endoscopy because my daughter has celiac disease and has many symptoms.

 
Mel
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said this on
19 Jul 2011 4:23:01 PM PST
I agree the FSA or HSA plans MAY reimburse your gluten free items. Be wary, however...as mine "did" then "didn't" and now are threatening to not do it in the future due to "too much trouble"...so here's my 2 cents worth:
First, I was a LOVER of all things grain, never had a white product, ate all the "healthy" stuff and had been sick for years with an incorrect digestive problem/s. On numerous meds and even had "diagnostic surgery" - all paid for under my HSA of course. Then the discovery of celiac disease. Wow. No more meds, follow the plan and wonderful health. Years of unknown cause of anemia - SOLVED. Stomach issues - SOLVED. Then the sticker shock - wow. $5 for "so-so" tasting bread (0r more)...flour at $5 a lb ? Yikes. So, I call the plan and YES they will cover the difference between "regular" and "gluten free." Whew that was easy. Not so fast there. EACH and every time I submit a gluten free product I must also submit the comparison of the other item. Not so easy if you don't buy it regularly (hubby still eats the other stuff) - ok, but now they want it DATED ? They make it so impossible to submit. My plan now says a photo will be fine. Really? And all that expense to document has not eaten up the difference in foods. So, next year, NO allowances for these foods into my plan. Just not worth the hassle. I truly feel absolutely sympathetic to the families and children who must strictly adhere to this plan. Food costs and lack of food choices in a small town will sometimes cause me to go off the food plan, but I always pay for that choice. We need so much more support - everywhere. Thanks to the many companies that are getting more products out there, but please help us out with cost factors ! Thanks for listening. Just my more than 2 cents worth.

 
Starla
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said this on
11 Jan 2012 1:20:10 PM PST
Do you have a copy of the form that she gave you? I am interested in this. I have been diagnosed this past year and we need more info... Thanks so much!




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