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From the Financial Hotline

By: Financial Hotline
Spring 2024 (Vol. 42, No. 1)

Q: I have a Flexible Spending Account (FSA) through my employer. Can I use it to pay for my gym membership?

A: The cost of a gym membership as a medical expense can be paid or reimbursed by an HSA, FSA, Archer MSA, or HRA only if the membership was purchased for the sole purpose of affecting a structure or function of the body (such as a prescribed plan for physical therapy to treat an injury) or the sole purpose of treating a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). Otherwise, the cost of a gym membership is for the general health of the individual and is not a medical expense.

The IRS is warning about misinformation about Health Savings and similar accounts that could lead to serious mistakes. Nonmedical nutrition, wellness and exercise expenses that aren’t explicitly related to a medical diagnosis or treatment aren’t reimbursable under these plans. But that hasn’t stopped certain bad actors from offering to provide a “doctor’s note” (for a price) that they claim would authorize health reimbursement plans to accept ineligible expenses, such as for nonmedical food that doesn’t satisfy normal nutritional needs. To review the IRS’s related FAQs:

Q: What are the 2024 depreciation limits for business vehicles?

A: The IRS guidance provides the 2024 depreciation limits for “luxury” business vehicles as follows: For vehicles placed in service in 2024, depreciation limits (including first-year bonus depreciation) are $20,400 for year one, $19,800 for year two, $11,900 for year three and $7,160 for each year after that. This includes passenger cars, as well as SUVs, trucks and vans if their gross vehicle weight (GVW) is 6,000 pounds or less. The IRS also announced lease inclusion amounts for lessees of passenger vehicles first leased in 2024.

Purchasing a heavier vehicle can offer tax advantages. New or used vehicles may be eligible for Sec. 179 expensing, which might allow you to deduct the entire cost. However, a reduced Sec. 179 limit ($30,500 for 2024) applies to vehicles (typically SUVs) with GVWs of more than 6,000 pounds but no more than 14,000 pounds.

Also keep in mind that, if a vehicle is used for both business and personal purposes, depreciation must be allocated between deductible business use and nondeductible personal use. The depreciation limit is reduced if the business use is less than 100%. If business use is 50% or less, you can’t claim any bonus depreciation or Sec. 179 expensing.

Q: What is a Payable-on-Death account?

A: These are estate planning tools that can be very helpful if used correctly. Payable-on-death (POD) accounts can be a quick, simple and inexpensive way to transfer assets outside of probate. They can be used for bank or credit union accounts, certificates of deposit and even brokerage accounts. Setting up such an account is as easy as providing the financial institution with a signed POD beneficiary designation form. Upon your death, your beneficiaries just need to present identification to the bank, with a certified copy of a death certificate, and the money or securities will be theirs. Be aware that POD accounts can backfire unless they’ve been coordinated carefully with your estate plan. For example, suppose Jack divides his assets equally among his three children in his will. He also sets up a POD account leaving $50,000 to his oldest child. That creates a conflict that may have to be resolved in court.

Q: I received a call from the Federal Trade Commission (FTC) giving specific instructions on a security breach on my financial accounts and requesting that I transfer the funds to a new, secure account. I verified the name of the staff member was legitimate, but I am still skeptical. Is this a scam?

A: YES!!! FTC has confirmed scammers are impersonating law enforcement, the FTC, the IRS and other government agencies, even using the names of real employees to steal money from unsuspecting consumers.

Legitimate callers will never send consumers to a Bitcoin ATM, tell them to go buy gold bars, or demand they withdraw cash and take it to someone in person. It will also never contact consumers to demand money, threaten to arrest or deport them, or promise a prize. If someone claims to work for the government and makes any of these demands or threats, hang up and report the call at in English or in Spanish.

In light of surging complaints around impersonation fraud, the FTC recently announced that it has finalized the Government and Business Impersonation Rule, which gives the agency stronger tools to fight scammers and return money to consumers harmed by impersonators.