There are many ways to lower an individuals tax liability when it comes to benefit offerings.  In addition, employers receive favorable tax treatment for most benefits offered to their employees. 

Employee Tax Benefits

Premium's that are paid by employees for health, dental and vision care can be set up on Section 125 of the Internal Revenue Code through premium reduction plan or "POP" Plan.  In addition, the portion paid by the employer is not subject to payroll taxes nor is it considered income to the employee.

Health Savings Accounts (hsa) enable an employer to fund their employee's account with money that is not considered additional income.  The 2008 limit for fund a health savings account is $2,900 for individuals and $5,800 for families.  Money not used in an hsa is not taxed and rolls over each year without any tax implication or requirement to use the hsa funds.  Over time, an individual who manages their health may end up with a size-able health care nest egg in their hsa.

Flexible Spending Accounts (fsa) enable an employee to set aside their own money on a pre-tax basis.  Employees are not taxed on the amount set aside thus reducing their overall tax liability.  For example, an individual opts to enroll in their employer's fsa and determines that setting aside $3,000 pre-tax will pay for expected medical claims.  The employee would not be taxed on the $3,000 thus reducing their tax burden by their federal tax level, state tax level, FICA and Social Security taxes.  In all, the employee may save $1,000 in taxes for medical expenses that would have occurred anyway.

Look for these and other tax savings vehicles to lower your tax liability while paying for medical expenses.