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60

The individual mandate is still in effect for 2018, which means you have to have qualifying health coverage or pay a fine--I can't find the penalties for 2018 but for 2017 it was the greater of 2.5% of your total household adjusted gross income, or $695 per adult. The new tax law does repeal the individual mandate starting in 2019. However, it would be ...


21

The big difference for me is that my contribution thorough a cafeteria plan also skips Social Security and Medicare taxes. That is a 6.2% (SS) + 1.45% (Medicare) tax on those contributions if done outside a cafeteria plan. Some companies make a contribution to a the HSA. If you handle your contributions outside of their channels they may see you as a non-...


21

There's an annual contribution limit, for 2019 it is $3,500 single/$7,000 family. Otherwise, it's fine to match future contributions to prior or planned qualifying expenses so long as the account was established before the expenses were incurred. There is no deadline for reimbursement, so if you have the procedure done now and pay out of pocket, you can ...


20

Yes, absolutely. The HSA, when used for medical expenses, allows you to essentially pay for your medical expenses tax free. Even if you don't have extra room in your budget, you can fund the HSA as you incur medical expenses, then withdraw money to pay the expenses, and you'll see an immediate tax benefit at tax time. However, let's say that you have ...


20

Purely financially, giving up the employer match is hard to argue. It's mathematically a free 100% return, but you can't get to it for many years. So it's a great benefit for the future. On the other hand, paying off student loans gives you a return equal to your interest rate. Hopefully that's less than 100% :-), but you need to weigh that against locking ...


18

This is a question I asked myself while considering an HSA, and I couldn't find any answers, so now that I have one, I'm answering it myself. I asked a family-friend/investment-banker about it, and he suggested you could only make distributions when on an eligible HDHP, but wasn't completely sure. I was about to post the question here to confirm or ...


18

I see this sort of misconception flying around. "Well the health insurance takes my money, makes a profit, and pays me only if I need it, otherwise I 'lose' money. Clearly, I would be better off saving my money." This sort of reasoning completely misses the point of insurance. Suppose you plan to pay $2,400 a year for either insurance or as savings in an ...


18

The HSA for most people, is a way to take pretax money and be able to use it for healthcare. No 7.5%/10% floor or need to itemize taxes in any way. It’s available based on the health plan you have, and a benefit for those who can set aside a bit of money to avoid tax. If you have zero $ out of pocket, and you plan offers no investment option, your point is ...


17

This is referred to as an HSA Mistaken Distribution. An HSA mistaken distribution occurs when you take a distribution and later find out that it is not for a qualified medical expense. For example, this could occur if you accidentally pay for a restaurant dinner with your HSA debit card. It can also occur if you take a distribution to pay for a medical ...


16

You should not continue contributing, as you're no longer qualified for it. You can keep it, and use the money in it toward the current medical expenses, without a problem. There are specific examples in pub 969.


16

There are a couple of things that are missing from the analysis. The PPO plans feature a copay for doctors visits and prescriptions. For example, if you need to see your doctor, under the PPO plans, you would pay $20 out-of-pocket. Under the HDHP plan, you would pay the negotiated price for a doctors visit. We don't know right now what this is, but let's ...


14

HSAs are very similar to IRAs. Any investment returns grow tax-deferred and once you reach age 59 1/2 65, you can withdraw the funds for any purpose (subject to ordinary income tax), just like a traditional IRA. If you can afford to do so, I would recommend you to pay medical expenses out-of-pocket and let the funds in your HSA accumulate and grow. In ...


13

I think the relevant document is IRS Pub 969, in the section "Distributions from an HSA" several subheadings down: Additional Tax There is an additional 10% tax on the part of your distributions not used for qualified medical expenses. which is followed by: Exceptions. There is no additional tax on distributions made after the date you are disabled, ...


13

According to the instructions for IRS Form 8889, Expenses incurred before you establish your HSA are not qualified medical expenses. If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified ...


13

Is it worth saving HSA funds until retirement? Yes Are there pros and cons from a tax perspective? Mostly pros. This has all of the benefits of an IRA, but if you use it for medical expenses then you get to use the money tax free on the other side. Retirement seems to be the time you are most likely to need money for medical expenses. So why wouldn't ...


13

Can I pay myself back later in the year if my HSA doesn't have adequate funds earlier in the year to pay for an expense? Yes. You can request a distribution for any qualified medical expenses that were incurred any time after the HSA was established, there is no time limit. If you want to maximize tax-free growth you could pay everything out of pocket and ...


13

There are a couple of specific criteria in the HDHP / HSA relationship. You must be enrolled in an HDHP in order to contribute funds to an HSA on a tax preferred basis. You do not need to be enrolled in an HDHP to spend the HSA funds on qualified medical expenses on a tax preferred basis. One of the qualifiers for an HSA eligible medical expense is the ...


12

Note that even if you are limited to the HSAs your employer provides, you can still set up your own HSA with whatever trustee you want and periodically transfer the funds from your employer sponsored HSA to your own HSA: according to IRS pub 969 "Contributions to an HSA" section: Rollovers A rollover contribution is not included in your income, is ...


12

The HSA contribution limits for a partial year can be very confusing. This is discussed in IRS Publication 969. There are two different ways to determine what your limits should be: the prorated limit and the last-month rule. Prorated Limit The standard way to handle the contribution limit for a partial year is to prorate the limit for the number of ...


12

Yes, you certainly can. As long as you incurred the expense while you had the HSA account in place, you can pay for the expense in any way you please, and reimburse yourself later for that expense out of your HSA. Just ask your bank/HSA custodian how to handle it, as the procedure is different with different institutions. With some, it is as simple as ...


12

Yes, you can be reimbursed through your HSA account; see for example NerdWallet's article. Best is to see your own provider's website, of course, but HSA rules in general allow for reimbursement for legitimate medical expenses.


11

I realize this is an old question, but it is a great question, as many people don't realize the hidden benefits of the HSA. If you are eligible for an HSA, it is important to open an account before you have any medical expenses (including dental). Once the account is open every valid medical expense you incur after that (not premiums though) is eligible to ...


10

It's simple. Most people don't spend $6000 a year in medical care. As for myself, there's probably only $400 or less, mostly in annual checkups and the like. If you are the type to require more medical care, then you will pay more per month. I know a person with asthma, kidney stones, and inflammatory issues. This person spends probably $1000 in co-pays ...


10

Here are the answers to your questions, from easiest to hardest. :) If I leave a HSA plan to join a PPO in the future does my saved money vanish? No, your money does not vanish. Your HSA is yours to keep. Even if you become ineligible to contribute to an HSA in the future, you keep your account, and you can withdraw on it for eligible medical expenses....


10

If you invest inside an HSA, it is very similar to investing inside an IRA. Any distributions stay in the HSA. If you sell an investment, the proceeds stay in the HSA. The only way you get any money out of an HSA without penalty before age 65 is to pay for qualified medical expenses. If you still have money in there at age 65, you can withdraw it without ...


10

What you are describing doesn't work. The reason is that when you do an excess contribution withdrawal, your HSA custodian will also send you any earnings from your excess contributions. These earnings will be listed in Box 2 of the 1099-SA form that they give you at the end of the year, and you will need to add them to your income as "other income" on ...


9

No danger. You can get in a car accident, break your leg skateboarding, or otherwise wind up in the hospital like anyone else. You can also get the money back, with a tax penalty, but you probably will never need to if you are responsible and live within your means. Do you need a wake up call about what things can cost? I knew a college student who broke ...


9

Your title question, Who could afford a higher premium who couldn't afford a higher monthly payment?, contrasts premium with monthly payment, but those are the same thing. In the body of your question, you list monthly payment and deductible, which is entirely different. The deductible is paid only if you need that much medical care in any one year. Most ...


9

First of all, one thing that is very important: Match is always better than no match. So, you should definitely use that match on your HSA if you've already maxed out the company match on your 401(k). In fact, for most people there won't be much reason to invest in your 401(k) above the company match at all. If, for example, your company matches only up ...


9

It appears that this is the case. From IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans Qualified medical expenses are those incurred by the following persons. You and your spouse. All dependents you claim on your tax return. Any person you could have claimed as a dependent on your return except that: ...


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