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HSA's vs. Itemized Deductions
Old 10-29-2015, 04:08 PM   #1
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HSA's vs. Itemized Deductions

So next calendar year we will be purchasing an independent healthcare plan as DW is retiring. Expected income may be around $70-80,000. Just a little too high to get an ACA subsidy.

Looking at the 2016 plans in MN it looks like if we have $8,000 in medical expenses on a high deductible HSA plan our total cost would be around $18,000.

The HSA Contribution Limit is $6,750 (not 55 yet).

Questions -

- If income is $80,000 and we itemize our taxes we would have $10,000 in itemized deductions right? So wouldn't that be better than a $6,750 HSA plan?
- Can we do both? Take the HSA deduction and itemize anything above the 10% + HSA contribution?

Between property taxes & home mortgage interest we will definitely be itemizing still.
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Old 10-29-2015, 04:15 PM   #2
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I don't see why you couldn't do both but I'm not positive. Max out the HSA and then take a deduction on medical bills on anything over 10% of income.
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Old 10-29-2015, 04:54 PM   #3
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There is nothing that compels you to use the HSA for paying present medical bills.

The real question on itemizing is not the medical expenses exceeding 10% of income, but will you have enough to exceed the standard deduction... you may reach it.

I believe (2014) SD is $12400 MFJ. So you 18000 (med expense) - (80000 - 6750)/10 leaves you short of SD. Look at what else you have to itemize. It may be worth something.

Note HSA contributions will reduce your income from an ACA subsidy viewpoint
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Old 10-29-2015, 05:08 PM   #4
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Quote:
Originally Posted by Fishingmn View Post
So next calendar year we will be purchasing an independent healthcare plan as DW is retiring. Expected income may be around $70-80,000. Just a little too high to get an ACA subsidy.

Looking at the 2016 plans in MN it looks like if we have $8,000 in medical expenses on a high deductible HSA plan our total cost would be around $18,000.

The HSA Contribution Limit is $6,750 (not 55 yet).

Questions -

- If income is $80,000 and we itemize our taxes we would have $10,000 in itemized deductions right? So wouldn't that be better than a $6,750 HSA plan?
- Can we do both? Take the HSA deduction and itemize anything above the 10% + HSA contribution?

Between property taxes & home mortgage interest we will definitely be itemizing still.
You allowable medical deductions would be $10,000 (the excess of your $18,000 in medical expenses over 10% of your $80,000 income)...BUT, this assumes that you pay your medical expenses from taxable accounts.

Yes, you can do both if you pay your medical expenses from taxable accounts. You cannot take a medical expense deduction for medical expenses paid from a HSA (ie; no double-dipping).

I have yet to take money out of my HSA... I'm letting it grow tax-free and will use it for medical expenses later.
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Old 10-29-2015, 05:32 PM   #5
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Thanks Bingy & PB

Definitely will still be itemizing. Between property taxes and mortgage interest we are over the standard limit.

pb4 that info is very helpful - actually helps to take the HSA reduction then to lower the amount of AGI making more of the expenses go above the 10%.
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Old 10-29-2015, 06:57 PM   #6
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Look at ways to have the medical insurance paid for by your company. You may have to declare it as income, but it is deductible for the company.

Quote:
Most self-employed taxpayers can deduct health insurance premiums, including age-based premiums for long-term care coverage. Write-offs are available whether or not you itemize, if you meet the requirements.

If you qualify, the deduction for self-employed health insurance premiums is a valuable tax break. With the rising cost of health insurance, a tax deduction can help you pay at least a portion of the premium cost.
https://turbotax.intuit.com/tax-tool.../INF12128.html
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Old 10-29-2015, 07:23 PM   #7
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Thanks Bingy & PB

Definitely will still be itemizing. Between property taxes and mortgage interest we are over the standard limit.

pb4 that info is very helpful - actually helps to take the HSA reduction then to lower the amount of AGI making more of the expenses go above the 10%.

This is one of the reasons I keep my mortgage. Being single my threshold to itemize is lower, and I still itemize. As premiums rise if some medical event ever occurs, it will be pretty easy adding in medical premiums to climb above 10% threshold. My goal is to protect and grow my HSA as long as possible to allow the income it will kick off at age 65 to pay for all medical stuff and still leave at modest stash to cover a few years "in the home" if needed.


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