HSA & Deducting Medical Expenses.
beckkl
I have an HSA with a HDHP, and my employer contributed $1500 to this
HSA this year. My family deductible was $7000, which we hit this year
with the birth of our first child. I have a few questions
1.) My deductible is > 7.5%, so I can itemize this cost, correct?
2.) I'm assuming I can just withdraw the $1500 from my HSA and put it
into my pocket, since it is easy to prove I incurred that costs during
the year?
3.) Are you allowed to write off both contributions to an HSA, as well
as your medical expenses? For example, next year, if I plan on
hitting the 7K again, would it be beneficial to contribute $5500 to my
HSA (which would total $7K with my employers contribution). Then at
the end of the year, itemize my expenses, effectively deducting both
the 7K in expenses as well as the $5500? Is this "double dipping"?
Any info would be awesome.
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Arthur Kamlet
beckkl <beck...@gmail.com> wrote:
>I was hoping someone could shed some light on a tax question I have:
>
>I have an HSA with a HDHP, and my employer contributed $1500 to this
>HSA this year. My family deductible was $7000, which we hit this year
>with the birth of our first child. I have a few questions
>
>1.) My deductible is > 7.5%, so I can itemize this cost, correct?
Perhaps. See below.
>2.) I'm assuming I can just withdraw the $1500 from my HSA and put it
>into my pocket, since it is easy to prove I incurred that costs during
>the year?
You are permitted to take the HSA money any way you choose.
If you have an HSA credit card and are in the casino at Mandalay Bay,
feel free to take out as much cash on that card as you choose. You
have not broken any laws.
The amount taken from an HSA account will be reported to you on
Form 1099-SA and will be taxable to you unless you declare some
or all of that money to have been spent on allowed HSA medical
expenses.
Note that i) any moneys taken from an HSA account and declared as spent
for allowable medical expenses caannot be claimed on Schedule A Line 1,
and, ii) your HSA allows certain expenses, such a OTC meds, which are
not allowable on Schedule A Line 1.
>3.) Are you allowed to write off both contributions to an HSA, as well
>as your medical expenses? For example, next year, if I plan on
>hitting the 7K again, would it be beneficial to contribute $5500 to my
>HSA (which would total $7K with my employers contribution). Then at
>the end of the year, itemize my expenses, effectively deducting both
>the 7K in expenses as well as the $5500? Is this "double dipping"?
The amount you contribute (but not the amount your employer
contributes, which is before tax so not taxable to you anyway)
is deductible. The amount distributed from the HSA and which
you declare you spent on HSA allowable medical expenses, is not
taxable.
In my counting, it is dipping only once.
>Any info would be awesome.
We were in a nice rstaurant this weekend, and the server asked
what I wanted to drink, and I said just the water. She said,
"awesome." My undertanding of awesome is certainly not awesome.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
beckkl
> In article <7e48ec7d-91fe-4b70-a7ae-1b0f63b8e...@m16g2000yqc.googlegroups.com>,
Assume all qualified medical expenses are valid for both HSA and
Schedule A Line1.
Contribute $5000 to HSA throughout the year, pretax.
During the year, spend $5000 on qualified medical expenses (Not via
the HSA card)
At the end of the year withdraw all $5000 from HSA account, since I
had $5000 in qualifying expenses
Enter $5000 on Schedule A Line 1.
That doesn't seem right to me, as the $5000 is not taxed, yet I'm
deducting it at the end of the year.
Arthur Kamlet
If you are not going to declare the 5000 withdrawn from the HSA to
have been spent on allowable HSA medical expenses, then you will pay
tax on that 5000 and also you can itemize the 5000 on schedule A.
You cannot declare the 5000 to be HSA allowable distruibution and also
itemize iton schedule A.
There are several steps.
One is to contribute out of pocket the 5000 to an HSA and deduct it.
You will do that. You do not deduct any employer contribution since
the employer has taken care of any tax aspects there.
Then you withdraw 5000 from the HSA. When you file your tax return
you get to declare how much of that 5000 was for allowable HSA
medical expenses and that declared amount is not taxable income and
is not allowed to be deducted on Schedule A for the same expenses.
Look closely at Publication http://www.irs.gov/pub/irs-pdf/p969.pdf
and also Form 8889. That should help clear things up.
--
beckkl
expenses are going to be greater than 7.5% anyway? It seems easier
just to deduct these expenses via Schedule A Line 1. I can then use
the employer HSA contribution to cover the expenses I can't deduct via
Schedule A. These costs are minimal.
D. Stussy
news:747d37d4-b75f-4e8a...@a31g2000yqn.googlegroups.com...
> On Nov 10, 10:33 am, kam...@panix.com (Arthur Kamlet) wrote:
> > In article
<7e48ec7d-91fe-4b70-a7ae-1b0f63b8e...@m16g2000yqc.googlegroups.com>,
> >
> > beckkl <beckp...@gmail.com> wrote:
> > >I was hoping someone could shed some light on a tax question I have:
> >
> > >I have an HSA with a HDHP, and my employer contributed $1500 to this
> > >HSA this year. My family deductible was $7000, which we hit this year
> > >with the birth of our first child. I have a few questions
> >
> > >1.) My deductible is > 7.5%, so I can itemize this cost, correct?
> >
> > Perhaps. See below.
You cannot deduct any amount that is reimbursed to you from your HSA during
the year.
If you reimburse yourself from an HSA for an expense that you deducted (for
a tax benefit - i.e. it reduced your taxes), AND that expense was deducted
in an "open year", you must amend the return for that open year to remove
the expense to the amount reimbursed.
You may not reimburse yourself for an amount deducted in an earlier year if
it is now a "closed year."
> > >2.) I'm assuming I can just withdraw the $1500 from my HSA and put it
> > >into my pocket, since it is easy to prove I incurred that costs during
> > >the year?
> >
> > You are permitted to take the HSA money any way you choose.
> >
> > If you have an HSA credit card and are in the casino at Mandalay Bay,
> > feel free to take out as much cash on that card as you choose. You
> > have not broken any laws.
> >
> > The amount taken from an HSA account will be reported to you on
> > Form 1099-SA and will be taxable to you unless you declare some
> > or all of that money to have been spent on allowed HSA medical
> > expenses.
> >
> > Note that i) any moneys taken from an HSA account and declared as spent
> > for allowable medical expenses caannot be claimed on Schedule A Line 1,
> > and, ii) your HSA allows certain expenses, such a OTC meds, which are
> > not allowable on Schedule A Line 1.
Not a problem, as your medical expenses exceeded the amount withdrawn. The
withdrawl will be tax free.
> > >3.) Are you allowed to write off both contributions to an HSA, as well
> > >as your medical expenses? For example, next year, if I plan on
> > >hitting the 7K again, would it be beneficial to contribute $5500 to my
> > >HSA (which would total $7K with my employers contribution). Then at
> > >the end of the year, itemize my expenses, effectively deducting both
> > >the 7K in expenses as well as the $5500? Is this "double dipping"?
> >
> > The amount you contribute (but not the amount your employer
> > contributes, which is before tax so not taxable to you anyway)
> > is deductible. The amount distributed from the HSA and which
> > you declare you spent on HSA allowable medical expenses, is not
> > taxable.
Note that any amount contributed by your employer REDUCES the amount you
may contribute. With a $6,150 cap (Rev. Proc. 2009-29), your employer's
contribution of $1,500 means that you cannot contribute more than $4,650.
If you were to put in $5,500, then you would be making an excess
contribution of $850 and subject to a 6% excise tax ($51), plus any tax or
penalty under state income tax laws, if applicable.
> > In my counting, it is dipping only once.
> >
> > >Any info would be awesome.
> >
> More specifically, can I do this:
>
> Assume all qualified medical expenses are valid for both HSA and
> Schedule A Line1.
>
> Contribute $5000 to HSA throughout the year, pretax.
Not without penalty. For 2009, the limit is $5,950, of which your employer
has already contributed $1,500. That leaves $4,450.
> During the year, spend $5000 on qualified medical expenses (Not via
> the HSA card)
Fine.
> At the end of the year withdraw all $5000 from HSA account, since I
> had $5000 in qualifying expenses
Yes.
> Enter $5000 on Schedule A Line 1.
NO! Expenses paid or reimbursed from the HSA are not deductible. You got
your deduction when you put the money in.
> That doesn't seem right to me, as the $5000 is not taxed, yet I'm
> deducting it at the end of the year.
That's because it is wrong.
John Levine
> expenses are going to be greater than 7.5% anyway?
Probably. If you put the expenses on Schedule A, you can only deduct
the amount that exceeds 7.5% of your AGI. If you contribute to the
HSA and then reimburse yourself, you can deduct all of it.
Also remember that unlike an FSA, money in an HSA is yours to keep,
approximately an IRA with a faucet on the side through which you can
take out money at any time to pay for medical expenses. An
alternative, if you can afford it, is to put money into the HSA and
leave it there, so if a family member is hit by the proverbial bus,
you'll have money available when you need it, or if your family stays
healthy, it's available for your retirement.
R's,
John
Brew1
> I was hoping someone could shed some light on a tax question I have:
>
> I have an HSA with a HDHP, and my employer contributed $1500 to this
> HSA this year. �My family deductible was $7000, which we hit this year
> with the birth of our first child. �I have a few questions
>
> 1.) My deductible is > 7.5%, so I can itemize this cost, correct?
> 2.) I'm assuming I can just withdraw the $1500 from my HSA and put it
> into my pocket, since it is easy to prove I incurred that costs during
> the year?
> 3.) Are you allowed to write off both contributions to an HSA, as well
> as your medical expenses? �For example, next year, if I plan on
> hitting the 7K again, would it be beneficial to contribute $5500 to my
> HSA (which would total $7K with my employers contribution). �Then at
> the end of the year, itemize my expenses, effectively deducting both
> the 7K in expenses as well as the $5500? �Is this "double dipping"?
>
> Any info would be awesome.
>
tax benefit of your contributions to the HSA is a so-called "above the
line" deduction--this comes under "adjusted gross income" on Form
1040, Line 25 (so far) for 2009--you get to subtract these
contributions (within defined limits) from your taxable income. You
do not put your out-of-pocket medical expenses on Schedule A (to the
extent they equal distributions from the HSA), because you never paid
tax on the money you or your employer put in. Hope this helps.
Seth
>> So is there any tax benefit to contributing to the HSA if my medical
>> expenses are going to be greater than 7.5% anyway?
>
>Probably. If you put the expenses on Schedule A, you can only deduct
>the amount that exceeds 7.5% of your AGI. If you contribute to the
>HSA and then reimburse yourself, you can deduct all of it.
Doesn't the contribution to an HSA come "over the line", that is, it
doesn't count towards AGI? In that case, you're always better off
maximizing the HSA, no matter how large your medical expenses are.
(If not, it doesn't matter for large expenses, since the excess over
7.5% is deductible whether or not it goes through an HSA. But if
expenses after HSA are under 7.5%, the HSA maximizes your deduction.)
Seth
removep...@yahoo.com
> > So is there any tax benefit to contributing to the HSA if my medical
> > expenses are going to be greater than 7.5% anyway?
>
> the amount that exceeds 7.5% of your AGI. 锟絀f you contribute to the
> HSA and then reimburse yourself, you can deduct all of it.
If you contribute to the HSA and DON'T reimburse yourself, you can
still deduct all of what you contributed to the HSA.
> Also remember that unlike an FSA, money in an HSA is yours to keep,
> approximately an IRA with a faucet on the side through which you can
> take out money at any time to pay for medical expenses. 锟紸n
> alternative, if you can afford it, is to put money into the HSA and
> leave it there, so if a family member is hit by the proverbial bus,
> you'll have money available when you need it, or if your family stays
> healthy, it's available for your retirement.
Right, and you get a deduction each year for money put into the HSA.