HSA or other Pre-tax to pay for Health Care

[whitestick]

My question is rather specific in that, when RE, and living off of Short Term Capital Gains income from non-sheltered accounts, does HSA or other methods provide for paying from pre-tax, when there is no earnings portion of income?
Second part question - when itemizing, does the 7.5% threshold for medical expenses apply to pure Short Term Cap Gains, when there is no, or very small earned income component?
Appoligies if this has already been discussed, but I couldn't find it using search.

[Martha]

Your HSA contribution would be deductible as an above the line deduction. The 7.5% rule you mention does not apply to your HSA contributions. For most everything you want to know about HSAs look at the Treasury website at: http://www.ustreas.gov/offices/public-affairs/hsa/

But yes, the 7.5% rule for deducting medical expenses applies no matter what the source of your income.

[magellan_nh]

Thanks to Martha for posting the treasury web site. It's a treasure trove of information

I was a bit confused about Martha's response w.r.t. whether you can deduct contributions to an HSA even if you don't have earned income.

The "All About HSAs" pdf from the treasury web site says that you don't need earned income to contribute to an HSA. Later in that same doc, it indicates that the deduction is allowed (since it's "above the line" and not itemized as Martha indicated) regardless of the income source.

from page 4 of the "all about hsas" doc (which is a great quick read)...
Who Is Eligible for HSAs?
• Any individual that:
– Is covered by an HDHP
– Is not covered by other health insurance
– Is not enrolled in Medicare
– Can’t be claimed as a dependent on someone else’s
tax return
• Children cannot establish their own HSAs
• Spouses can establish their own HSAs, if eligible
• No income limits on who may contribute to an
HSA
• No requirement of having earned income to
contribute to an HSA

Jim

[lazygood4nothinbum]

the insurance sales guy who mislead me on pre-existing conditions (per other post) also told me that i can not run money thru the hsa to pay for insurance premiums but i find other places (including above mentioned treasury site) which seem to indicate i can. anyone know which is what with that?

edit: sorry, never mind. just found this...

You can generally not use the money to pay for medical
insurance premiums, except under specific
circumstances, including:
• Any health plan coverage while receiving federal or
state unemployment benefits.
• COBRA continuation coverage after leaving
employment with a company that offers health
insurance coverage.
• Qualified long-term care insurance.
• Medicare premiums and out-of-pocket expenses,
including deductibles, co-pays, and coinsurance for:
Part A (hospital and inpatient services)
Part B (physician and outpatient services)
Part C (Medicare HMO and PPO plans)
Part D (prescription drugs)

bummer

[whitestick]

Thanks Martha and Magellan, I knew you guys would point me to the right place

[REWahoo]

Originally Posted by lazygood4nothinbum

the insurance sales guy who mislead me on pre-existing conditions (per other post) also told me that i can not run money thru the hsa to pay for insurance premiums but i find other places (including above mentioned treasury site) which seem to indicate i can. anyone know which is what with that?

Nope. We can't use our HSA funds to pay health insurance premiums, but we can use them to pay LTC insurance premiums. Doesn't make sense to me, but them's the rules.

[lazygood4nothinbum]

looks like i could have paid for cobra too but i used non-taxed estate medical gifting for that. single here and unless i wind up hooking up later in life to someone dumb enough to become dependent on me, i won't be going with long term health insurance. i figure i'll likely either have a house or a boat or enough cash left to pay 4 or 5 years in a nursing home. if i'm still alive after that just throw me into a state-run institution or back on the street. by then i won't know the difference.

[Alan]

Thank you to the posters on this subject

In reading about the qualified expenses I noticed LTC is covered so I wondered if my company's FSA also included LTC. The plan's standard documentation does not list it but did point me to the www.irs.gov/pub/irs-pdf/p502.pdf and I find that it is covered, and our premiums are both under the maximum you can claim. Pity I didn't spot this a month earlier, but what the heck, there is always next year, plus if we have a good year health wise it is something else to choose to spend the surplus on