HSA rules?

[RobbieB]

You guys don't use the HSA dough to pay for co-pays, drugs and dentist? Just invest it and use your after tax dough for that stuff?

 

[brucethebroker]

Obamacare policies sold in our state identify the HSA compatible plans. We have our contributions stashed at the credit union in an HSA account. We have a debit card for withdrawls.

BTW, contributions to HSA accounts help reduce your Modified Gross Income for Obamacare tax credits.

 

[Mulligan]

You guys don't use the HSA dough to pay for co-pays, drugs and dentist? Just invest it and use your after tax dough for that stuff?

Yes. Outside of dental cleanings, I have no medical bills. But if I ever do, I will just put them in the envelope I have saved and not lose them. Then 20-30 years from now, if all goes well, I will pull out that amount on my receipts tax free. While hopefully using the balances to pay medicare premiums tax free also with the dough.
Since I am in 31% tax bracket ( state and fed) this is a rather nice tax benefit to milk as hard as possible. Plus I enjoy trading and flipping my preferred stocks in this account with no tax accounting needed!


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[mpeirce]

You guys don't use the HSA dough to pay for co-pays, drugs and dentist? Just invest it and use your after tax dough for that stuff?

Exactly.

We used our HSA in the usual way the first year. Then our CPA had a little talk with us and now we us it as a tax advantaged savings vehicle. We also keep records of our medical expenses so we can easily take money out of the HSA in the future when we want it.

One last point. Although HSAs are better then even ROTHs (again if you follow the rules), they are not better when left in an estate. They revert to taxable of they are inherited by someone other than a spouse. So spend the money in an HSA before spending the money in a ROTH if you plan on leaving heirs.

https://www.bogleheads.org/wiki/Health_savings_account#Inherited_HSA

 

[RobbieB]

I use mine a lot for co-pays, drugs and especially dental. Four cleanings a year and I'm on my 2nd root canal and fifth crown and don't have dental insurance. I sent HSA Bank some more dough this year to stay above 5 grand, close to the max, so I'll get to write that off.

Me thinks I'll just continue to use it in this manner as my "receipt envelope" would get really fat and then I'd probably lose it -

 

[Mulligan]

I use mine a lot for co-pays, drugs and especially dental. Four cleanings a year and I'm on my 2nd root canal and fifth crown and don't have dental insurance. I sent HSA Bank some more dough this year to stay above 5 grand, close to the max, so I'll get to write that off.

Me thinks I'll just continue to use it in this manner as my "receipt envelope" would get really fat and then I'd probably lose it -

If I wasn't investing proceeds with HSA money, I would do the same. I like the tax free profits from trading, and then hopefully the tax free use to pull out medicare premiums when hitting 65 down the road.


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[Walt34]

.....and then find my own HSA plan to continue until I turn 65 and qualify for Medicare. At that point, if I want to, I understand that I can withdraw from the HSA account to pay for Medicare premiums without having to pay tax or capital gains on it.

That is correct. Initially I didn't know that and wrote checks for the Medicare premiums but later I paid them with HSA funds.

 

[explanade]

Not all high deductible health plans are HSA eligible. If you have a copay for non-preventive care office visits and/or Rx instead of a deductible, the HDHP is not HSA eligible. If the copays only start after the deductible has been met, then it usually is HSA eligible. You can call your plan's customer service number and they can tell you if it qualifies.

For 2016, the plan's individual deductible must be $1300 or more ($2600 family). The out-of-pocket limit can not exceed $6,550 ($13,100 family). There are plans with higher OOP limits so they are also not HSA eligible.

https://www.irs.gov/publications/p969/ar02.html

First dollar benefit (copay) rules explained: White Paper Report: Most High Deductible Plans are NOT HSA-qualified

I'm trying to decide between an HSA and non HSA plan now.

The non HSA plan has things like $70 co-pay for the first 3 visits and some nominal fees for prescriptions without meeting the deductible.

I had HSA plans the last year and this year and have only visited doctors for physical exams or the preventive benefit which is covered (though I paid $35 for a blood test to a separate lab this year).

Last year, the HSA tax benefit was about $550 more in federal tax returns.

I'm not sure how much doctors visits are but I think they're in the range of $150-225 around here.

I tried plugging in actual premium quotes as well as 25% tax bracket and 4 doctors visits and 2 prescriptions in this calculator:

Health Savings Account (HSA) vs. Traditional Health Plan - (HDHP) High Deductible Health Plan Calculator--AARP

It spits out that the traditional plan would cost me $105 more a month than the HSA plan. The actual premium difference is $16 a month, which would give me $55 copays for doctors visits and $30 for generic prescriptions.

But the biggest thing is it estimates about $1100 a year in tax savings, which would account for most of the $105 a month difference in plans.

Now if the tax savings from last year was more in the $550 range, where is it getting this $1100 number?

 

[zinger1457]

But the biggest thing is it estimates about $1100 a year in tax savings, which would account for most of the $105 a month difference in plans.

Now if the tax savings from last year was more in the $550 range, where is it getting this $1100 number?

You don't say how much your HSA contribution was but for an individual age 55+ the limit is $4350. If in the 25% tax bracket that's $1087 less in taxes.

 

[explanade]

Yes it was $4350.

 

[MooreBonds]

I'm trying to decide between an HSA and non HSA plan now.

Don't overlook the fact that not only is there a tax deduction for current contributions, but all future gains are also tax-free when used for qualified medical expenses! There is not a single other better (or equal) provision in the entire tax code! I have been letting my HSA contributions grow in my account for many years, and will be reaping the benefits when I start withdrawing for various medical expenses in the future.