Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
HSA and taxes
Old 09-14-2006, 02:11 PM   #1
Full time employment: Posting here.
 
Join Date: Sep 2006
Posts: 608
HSA and taxes


I hope this is appropriate to THIS board - seems like people discuss
pretty general financial questions here ...

Being ER'ed, I have an individual high-deductible health insurance
policy, with an HSA account. (I do contract occasionally, through an
agency for whom I'm a W2 employee, but I'm part-time so ineligible
for their health insurance).

I understamd that the HSA premium ($2K/yr) is deductible, above the
line. But the policy premiums are not deductible, except on Schedule A
(subject to 7.5% AGI exclusion), no ? They can't be a self-employed
health insurance deduction, because I have no Schedule C income ?

Since my income is quite low, the insurance premiums pretty much get
me to 7.5% AGI. So my question is, does it make sense to pay medical
expenses with ordinary after-tax money (savings acc't, whatever) rather
than the HSA account ? They'll be deductible, since the insurance
premiums got past the 7.5% AGI, and meanwhile the HSA gets bigger.

Does this make sense, and is it legal ?

Thanks, John

__________________

__________________
JohnEyles is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: HSA and taxes
Old 09-14-2006, 03:12 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,197
Re: HSA and taxes

Quote:
I the HSA premium ($2K/yr) is deductible,
Did you mean to say that the HSA contibutions are deductible?

It definitely makes sense to use your HSA as a retirement account, spending after-tax money on medical expenses so it can grow.* That's what I'm doing.

My guess is that it's legal, too, even if your medical expenses are above 7.5% and deductible.

Correct that the policy premiums are not deductible except as you noted.

__________________

__________________
Al
TromboneAl is offline   Reply With Quote
Re: HSA and taxes
Old 09-14-2006, 03:20 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Jan 2004
Posts: 2,049
Re: HSA and taxes

Quote:
Originally Posted by JohnEyles
Being ER'ed, I have an individual high-deductible health insurance
policy, with an HSA account. (I do contract occasionally, through an
agency for whom I'm a W2 employee, but I'm part-time so ineligible
for their health insurance).
What T-Al said but can you go to 1099 status? You'd get the self-employed premium deduction and could start a solo 401k or a SEP IRA as well.
__________________
eridanus is offline   Reply With Quote
Re: HSA and taxes
Old 09-14-2006, 03:25 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,197
Re: HSA and taxes

Here's the relevant HSA publication: LINK.

While self-employed, I always deducted all medical expenses and premiums.

After retiring, I still file a Schedule-C for my meager jazz income (or loss). This is generally between -1,000 and +1,000 per year.

I wonder if I could use that as a basis for deducting medical expenses/insurance premiums? Thoughts?
__________________
Al
TromboneAl is offline   Reply With Quote
Re: HSA and taxes
Old 09-14-2006, 03:46 PM   #5
Full time employment: Posting here.
 
Join Date: Sep 2006
Posts: 608
Re: HSA and taxes


Sorry, yes I meant that the HSA *contribution* is deductible.

Ok, glad it seems sensible not to pay costs that are above the 7.5%
exclusion from the HSA, and let it grow 'til I really need it. Only funny
thing I'll do is to get my dentist to credit my HSA MasterCard, and then
I'll repay him from bank account funds. I guess that's kosher.

As far as going 1099 (so that I can deduct the premiums on the
hi-deductible policy as self-employed health insurance above-the-line),
that would be quite a battle. But it's quite a story in itself (see below).

Thanks tons, John

P.S. My former employer (who shall remain nameless, but is famous to investors
WAY out of proportion to their size, due to stock volatility and legal drama) was
INSISTENT that I go through an agency. Apparently they had contractors
who failed to pay estimated taxes and had big bills at filing time, and the IRS
came after the company - bizarre, isn't it totally the contractors' fault ?
And also, they're paranoid about being accused of firing me and hiring me
back as a contractor, to save benefits. I guess unscrupulous companies
WILL do that, but there's no benefit to them with me, because I charge
a much higher hourly rate than my annual salary divided by 2000hrs.

And I'm just as happy, because I have NO self-employment tax, since as a
W2 employee of the agency, THEY pay the employer end of FICA/Medicare
(which of course they pass on to my employer as a premium on my hourly
rate !).
__________________
JohnEyles is offline   Reply With Quote
Re: HSA and taxes
Old 09-14-2006, 03:52 PM   #6
Full time employment: Posting here.
 
Join Date: Sep 2006
Posts: 608
Re: HSA and taxes

Quote:
Originally Posted by TromboneAl
Here's the relevant HSA publication:* LINK.

While self-employed, I always deducted all medical expenses and premiums.

After retiring, I still file a Schedule-C for my meager jazz income (or loss).* This is generally between -1,000 and +1,000 per year.

I wonder if I could use that as a basis for deducting medical expenses/insurance premiums?* Thoughts?
Aren't you STILL self-employed ?* It seems to me like you can deduct your premiums
as self-employed health insurance, at least up to your Schedule C income, and then
deduct whatever premium is left over, plus your expenses, on Schedule A.* If you're
retired, I assume 7.5% of your AGI ain't that much ?


John
__________________
JohnEyles is offline   Reply With Quote
Re: HSA and taxes
Old 09-14-2006, 07:53 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,197
Re: HSA and taxes

Yes, that's right. Since we don't have a mortgage, we usually take the 10K standard deduction; I'll have to see whether we could get more if we itemize.
__________________

__________________
Al
TromboneAl is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Interesting HSA Distribution Rule kramer Health and Early Retirement 28 05-10-2007 02:00 PM
HSA after you ER teejayevans Health and Early Retirement 15 04-17-2007 02:06 PM
HSA plans included in new tax legislation shiny FIRE and Money 11 02-20-2007 07:10 AM
HSA Summary TromboneAl FIRE and Money 96 12-28-2006 08:28 PM
HSA insurance cfcf FIRE and Money 34 03-23-2005 03:51 AM

 

 
All times are GMT -6. The time now is 11:13 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.