NW-Bound
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- Joined
- Jul 3, 2008
- Messages
- 35,712
Is there an advantage to doing it that way, rather than just paying as you go from the HSA account?
I'm thinking the advantage is that the HSA funds get more time to grow.
But if one used the HSA money, he would not have to pay with out-of-pocket money. Then, he would have more money to save, which would grow just the same.
I think there's a difference in the tax however. HSA contribution is always tax-free, while only the portion of healthcare cost above 10% of AGI is tax-deductible.
Let's say one has an AGI of $100K, and incurs a healthcare expense of $10K. There's no tax deduction because it is not above 10% of AGI. So, he pays out of pocket and still makes a tax-deductible HSA contribution. Then, later he withdraws from HSA to make up for the payment. This way he gets some tax cut.