HSA insurance

[laurence]

This is an exciting thread for me! In all my retirement calculations, it was health care that worried me the most, since the cost seems to grow by leaps and bounds year after year. I'm curious, I may have missed it in this thread, but are premiums allowed to be paid out of this account?

 

[wabmester]

I'd end up with 971.10 at the end of the year just for the privledge of having an account with them. )Not to mention what inflation would do this account over time.)

Right. I realize that if you were only to deposit the min, and only do it for one year, and choose the lowest yielding option, then you might lose money.

However, I plan to contribute $3200 a year for the next 20 years or so, and invest the same way I would "real" money, so I hope to do better than your example

 

[Cal]

This is an exciting thread for me!  In all my retirement calculations, it was health care that worried me the most, since the cost seems to grow by leaps and bounds year after year.  I'm curious, I may have missed it in this thread, but are premiums allowed to be paid out of this account?

Before retirement, you cannot use the money to pay for your premiums - only for medical expenses (doctor visits, prescriptions, etc). After you are retired, you can use the money to pay your insurance premiums.

 

[Al]

It seems to me that the way to use the HSA is to go with the highest deductible which would lower the premium. Since the deductible is an eligible expense to be paid out of the account, in effect, you are trading premium cost for deductible cost. In other words, you make the premiums deductible by "converting" them to be part of the higher deductible.

For example, I can get a high risk pool policy in texas as follows:

$500 deductible -- $ 878 per month.
$2500 deductible -- $ 441 per month.

By going with the $2500 deductible, I can use HSA tax deferred money to pay the $2000 extra deductible but save $5244 ((878-441) * 12) in premiums.



As far as insurance premiums go, here is what I found on another site:



Generally, health insurance premiums are not qualified medical expenses except for the following: qualified long-term care insurance, COBRA health care continuation coverage, and health care coverage while an individual is receiving unemployment compensation. In addition, for individuals over age 65, premiums for Medicare Part A or B, Medicare HMO, and the employee share of premiums for employer-sponsored health
insurance, including premiums for employer-sponsored retiree health insurance can be paid from an HSA. Premiums for Medigap policies are not qualified medical expenses.

 

[rose]

The HSA rules limit the amount of deductible. I have a $1500 deductible and $5500 out of pocket. I can't use HSA because my out of pocket is too high. The max is $5000. Dumb! I'm retired and buy individual insurance with a high deductible and can't use HSA. Go figure!

 

[ESRBob]

I


Generally, health insurance premiums are not qualified medical expenses except for the following: qualified long-term care insurance, COBRA health care continuation coverage, and health care coverage while an individual is receiving unemployment compensation. In addition, for individuals over age 65, premiums for Medicare Part A or B, Medicare HMO, and the employee share of premiums for employer-sponsored health
insurance, including premiums for employer-sponsored retiree health insurance can be paid from an HSA. Premiums for Medigap policies are not qualified medical expenses.

Al,

If my understanding is correct, the quote above applies to using a HSA to pay for the high deductible health insurance premiums -- it is basically not allowed except under the circumstances you mentioned.

But on a separate note, outside the HSA, people who have self-employment companies can now adjust gross income down by the amount of the health insurance premium, 100%. I have had an S-corp for years, so this seems like an easy one for me, but others might want to consider starting a company for this deduction alone.

My feeling is that this deduction should be available to everyone (it puts you on even footing with employed people whose employers deduct health insurance premiums) but in the meantime, it is one more reason to think about starting a self-employment company to earn a bit of income doing something fun and occasionally lucrative.

 

[Al]

Interesting idea.

If you have an S corporation or are self employed, are you limited in the size of your deduction to the amount of net profit you declare at tax time ?

For example if you report 10,000 dollars AGI on April 15th, 5,000 dollars earned income and the rest investment income, could you deduct say, 7,000 dollars in premiums ? Or would 5,000 be the limit ?

Do you even have to show a profit ?

 

[eridanus]

http://www.irs.gov/publications/p535/ch07.html#d0e5536

"Self-Employed Health Insurance Deduction

You may be able to deduct 100% of the amount paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following.

* A self-employed individual with a net profit reported on Schedule C, C-EZ, or F."

 

[eridanus]

Re: HSA insuranceIf you do not use a distribution

HSA withdrawals after 65:

http://www.irs.gov/publications/p969/ar02.html#d0e636

"Reporting Distributions on Your Return

How you report your distributions depends on whether or not you use the distribution for qualified medical expenses (defined earlier).

If you use a distribution from your HSA for qualified medical expenses, you do not pay tax on the distribution ....

If you do not use a distribution from your HSA for qualified medical expenses, you must pay tax on the distribution. ...

Exceptions. There is no additional tax on distributions made after the date you are disabled, reach age 65, or die."


Take that as you will.


*Usual disclaimer: I'm not a CPA or tax attorney. Don't believe everything you read on the net.

 

[ESRBob]

Interesting idea.

If you have an S corporation or are self employed, are you limited in the size of your deduction to the amount of net profit you declare at tax time ?

For example if you report 10,000 dollars AGI on April 15th, 5,000 dollars earned income and the rest investment income, could you deduct say, 7,000 dollars in premiums ? Or would 5,000 be the limit ?

Do you even have to show a profit ?

Al,
I should ask my accountant to be sure, but my gut is that unlike the schedule C self-employment company, the S-Corp (or LLC) can deduct health insurance premiums now just like any other expense, and be fully deductible even in years you don't make a profit. There needs to be a genuine attempt to make a profit, and at some point there needs to be a profit shown, but I don't think the bar is very high. it all seems to be a grey area as to how many years you can run losses before someone asks questions or disallows your S-Corp.