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Old 11-22-2020, 01:33 PM   #41
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I realized I didn't answer the original question.

Right now, we are using the HSA as an investment vehicle. In my first year of having it, I used it to pay some medical bills. After I did my taxes, I realized the paperwork was a bit unwieldy. So for now, just letting it ride.

The plan is to use it for LTC premiums and/or Medicare premiums after age 65 to 70, or so. The paperwork on that should be very simple.


...


Or, I could buy a Porsche.
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Old 11-22-2020, 02:45 PM   #42
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Originally Posted by bada bing View Post
The amount that is required to be included in gross income by any beneficiary (other than the estate) is reduced by the amount of qualified medical expenses that were incurred by the decedent prior to death and paid by the beneficiary within one year of death.
The part I bolded makes me uncomfortable. I've got receipts going back to 2009, when I first opened an HSA. I can use those to draw from my HSA tax-free. But if I die, it doesn't seem my beneficiary gets a tax break on those, because they were paid by me, not the beneficiary.

My read on this is, if I get sick and rack up a bunch of bills, and die, my beneficiary can pay those bills (within a year of death), and the amount they pay reduces the income from the inherited HSA.

I could be wrong. I could consult a tax expert, but it's not a huge amount, and I see no drawbacks at all from withdrawing from the HSA to the extent of my medical receipts before withdrawing from a Roth, so that's my plan.
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Old 11-22-2020, 02:50 PM   #43
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I didn't read OP's post #17 on this thread as hyperbole. I read it literally.
I didn't take it literally, but if it is, that's tax fraud, and I would hope they get audited on it and charged.

I'm all set if I happened to get audited. I have a spreadsheet, with correlated paper receipts and scanned copies of those saved as backup. I won't even break a sweat about it.
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Old 11-22-2020, 09:34 PM   #44
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Yes, HSA accounts are individual, although you can pay for qualified medical expenses for spouses and dependent children out of your HSA account.


There are family HSA plans under an employer sponsored plan. I had one through my former employer. Itís in my name but I contributed for myself and DH. I was able to contribute the max for both of us.

Going forward, even if you arenít working, you can contribute to an HSA as long as your health insurance is HSA eligible. We will contribute to my HSA and open one for DH if we need it to stay under the ACA cliff next year.
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Old 11-23-2020, 02:48 AM   #45
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There are family HSA plans under an employer sponsored plan. I had one through my former employer. It’s in my name but I contributed for myself and DH. I was able to contribute the max for both of us.

Going forward, even if you aren’t working, you can contribute to an HSA as long as your health insurance is HSA eligible. We will contribute to my HSA and open one for DH if we need it to stay under the ACA cliff next year.
That was your HSA account, not a joint HSA account. If both spouses want to contribute the over 55 catchup contribution of $1000, then the other spouse must open a second HSA account for themselves.

https://www.peoplekeep.com/blog/how-...rk-for-spouses
https://thelink.ascensus.com/article...ean-family-hsa
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Old 11-23-2020, 03:06 AM   #46
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I didn't take it literally, but if it is, that's tax fraud, and I would hope they get audited on it and charged.
OP here.

I will try to settle the debate. It was not hyperbole and was literal. But I was not talking about anything that is illegal. Keep in mind that in my OP I said my conclusion was that it is most beneficial for a rich person with large medical bills. A person in that situation could do the following:

1) Contribute $7200 annually (family max) to HSA with triple tax free benefits for 20 years. Rich person has no problem doing that.
2) Invest entire HSA account in $TSLA and potentially grow the account to $500k or more. Rich person doesn't need this money to be safe.
3) Save all of my receipts for medical expenses which are very high, lets say $30k/year. Never use the HSA to pay these expenses (rich person). Over the course of 20 years I amass receipts for $600k.

Now, I buy a Porsche 911 Turbo S for $300k. I take a $300k distro from my HSA by using the receipts I have saved up for the past 20 years. This was triple tax free money. Might just buy DW one too because she had medical receipts too.
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Old 11-23-2020, 06:38 AM   #47
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Now, I buy a Porsche 911 Turbo S for $300k. I take a $300k distro from my HSA by using the receipts I have saved up for the past 20 years. This was triple tax free money. Might just buy DW one too because she had medical receipts too.
Hey OP, thanks for the clarification! Hey, as long as you have the medical bills, what you say is legal. I'm sorry I mentioned hyperbole.

Actually, you do have a good point about rich folks. Many self-insure, so there's a good chance they'll have significant bills to pay.

Now, there's only one small glitch: you have to find the TSLA to invest in. That ain't easy.
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Old 11-23-2020, 08:14 AM   #48
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OP, thanks for the clarification.

Yes, that is legal. While money is fungible so you can think of it that way, in the IRS' eyes what you did is reimburse yourself for those medical expenses and then used your reimbursement money to buy a Porche (or two).
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Old 11-23-2020, 08:20 AM   #49
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I think you're conflating the "buy a porsche" with the "legally withdraw from your HSA" part.

There are three events:

You put in tax-advantaged money
You incur approved medical expenses
You withdraw money to reimburse these expenses

What you do with it after that - porsche, hookers, liquor - is not relevant.
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Old 11-23-2020, 08:25 AM   #50
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So then the tax law discriminates against healthy rich folks, 'cuz they won't have the receipts to buy the Porsche?! Sorry, bad Monday morning joke :-)

This may be a dumb question about receipts. For eligible medical expenses paid with our HSA debit card, do we still need to maintain documentation? For those, reimbursement essentially occurs at the point of transaction.
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Old 11-23-2020, 08:28 AM   #51
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This may be a dumb question about receipts. For eligible medical expenses paid with our HSA debit card, do we still need to maintain documentation? For those, reimbursement essentially occurs at the point of transaction.
Technically, yes, but I think a lot of us are referring to receipts in the abstract. You don't literally have to save a paper folder, but you do need the means to reconstruct the data in the event of an audit from the IRS.
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Old 11-23-2020, 08:30 AM   #52
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So then the tax law discriminates against healthy rich folks, 'cuz they won't have the receipts to buy the Porsche?! Sorry, bad Monday morning joke :-)
"Damn, I'm 95 years old and never had enough medical expenses to use my HSA money!" - said no one, ever.
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Old 11-23-2020, 08:37 AM   #53
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So then the tax law discriminates against healthy rich folks, 'cuz they won't have the receipts to buy the Porsche?! Sorry, bad Monday morning joke :-)

This may be a dumb question about receipts. For eligible medical expenses paid with our HSA debit card, do we still need to maintain documentation? For those, reimbursement essentially occurs at the point of transaction.
Yes. Have some record of the transaction. And also show it wasn’t used for itemized deduction the year it was incurred.

We are paying for Medicare premiums directly from our HSA and so it’s easy to provide the documentation. An annual report/payment history of premiums we paid from Medicare.

Also, if the rich person makes it to Medicare, they are probably paying large Medicare premiums due to IRMAA. Those expenses are HSA qualified.
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Old 11-23-2020, 09:23 AM   #54
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Originally Posted by Aerides View Post
I think you're conflating the "buy a porsche" with the "legally withdraw from your HSA" part.

There are three events:

You put in tax-advantaged money
You incur approved medical expenses
You withdraw money to reimburse these expenses

What you do with it after that - porsche, hookers, liquor - is not relevant.
Yes, this. You can pay medical bills directly from an HSA with a check or debit card attached to the HSA account. You cannot buy a Porsche directly from an HSA account.
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Old 11-23-2020, 10:09 AM   #55
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Saving and investing in it for the post-retirement years. I joined my current employer in 2017 and this is the first company where I've worked who had this available. Been maxing it out but not spending from it for medical bills.
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Old 11-23-2020, 10:35 AM   #56
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Originally Posted by Aerides View Post
I think you're conflating the "buy a porsche" with the "legally withdraw from your HSA" part.

There are three events:

You put in tax-advantaged money
You incur approved medical expenses
You withdraw money to reimburse these expenses

What you do with it after that - porsche, hookers, liquor - is not relevant.
Hookers and liquor are likely to lead to more approved medical expenses down the road Could you find a doctor crooked enough to prescribe a Porsche for stress relief?

I've had an HSA available to me, IIRC, in various j*bs since they became available. When times are good I've managed to save receipts and avoid spending from it. Over the last few years we've made infrequent large withdrawals to prepay orthodontics and chiropractic, but we're back in max accumulation mode and our balance is at an all-time high.

I keep exactly one year of deductible in cash and invest the rest. I use the HSA for the most conservative elements of my AA, with the idea that this account would get raided before the IRAs and 401ks in a dire emergency. This allows those other accounts to be more aggressive, of course.

We don't expect to use Medicare. The plan is to largely forgo insurance and use the HSA to pay as we go, assuming we follow through with our plan to reside in a LCOL country.
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Old 11-23-2020, 03:27 PM   #57
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So then the tax law discriminates against healthy rich folks, 'cuz they won't have the receipts to buy the Porsche?! Sorry, bad Monday morning joke :-)

This may be a dumb question about receipts. For eligible medical expenses paid with our HSA debit card, do we still need to maintain documentation? For those, reimbursement essentially occurs at the point of transaction.
Personally when I make an HSA distribution, I'll document to my satisfaction which receipts that distribution was for, either with a printout from my HSA Excel spreadsheet, or my paper receipts, or both. I'll put that documentation with my paper printout of my tax return, which goes into a set of rotating file folders where I keep the last three or four years of returns.

If the IRS chooses to audit any of those returns, I just pull out my paperwork. If not, then eventually the paper copy of the return and the associated documentation gets shredded three or four years down the road.

Technically the IRS can go back further in severe cases of fraud, but since I don't do that I'm fine with just the last three or four years of returns in paper form.

In your case, you might just want to print out a copy of your HSA statements or whatever your HSA custodian does for you that way and put that with your tax paperwork.

I think the IRS rules just say that you have to keep reasonable records. I keep all of my paper receipts and an Excel spreadsheet with date, amount, explanation (so I know why it was qualified), and pointer to my documentation.
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Old 11-23-2020, 03:42 PM   #58
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OP here.

I will try to settle the debate. It was not hyperbole and was literal. But I was not talking about anything that is illegal. Keep in mind that in my OP I said my conclusion was that it is most beneficial for a rich person with large medical bills. A person in that situation could do the following:

1) Contribute $7200 annually (family max) to HSA with triple tax free benefits for 20 years. Rich person has no problem doing that.
2) Invest entire HSA account in $TSLA and potentially grow the account to $500k or more. Rich person doesn't need this money to be safe.
3) Save all of my receipts for medical expenses which are very high, lets say $30k/year. Never use the HSA to pay these expenses (rich person). Over the course of 20 years I amass receipts for $600k.

Now, I buy a Porsche 911 Turbo S for $300k. I take a $300k distro from my HSA by using the receipts I have saved up for the past 20 years. This was triple tax free money. Might just buy DW one too because she had medical receipts too.
Man, you definitely have way too much time on your hands. Time to get a hobby. I am skeptical that you had this in mind when you wrote the OP. I guess we'll agree to disagree whether someone able to contribute $7,200 a year to a HSA is rich or not. I also doubt that you could find many HSA's that are all-in on TSLA or similar high-flyer stocks... or that would have $30k/year of medical expenses for 20 years in a row. But definitely a valiant attempt to rationalize any illegitimate activity that you might have had in mind when you wrote the OP.
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Old 11-23-2020, 03:45 PM   #59
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Originally Posted by Aerides View Post
I think you're conflating the "buy a porsche" with the "legally withdraw from your HSA" part.

There are three events:

You put in tax-advantaged money
You incur approved medical expenses
You withdraw money to reimburse these expenses

What you do with it after that - porsche, hookers, liquor - is not relevant.
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Old 11-23-2020, 05:50 PM   #60
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DH and I started doing HSAs many years ago, contributed the max, invested the money. Now are HSAs are sizable. We plan to move into a Continuing Care Community (CCRC) in the near future. There is a large entry fee for the CCRC and a portion of that entry fee is considered a medical expense under the HSA rules. We plan to take money out the HSA to pay the portion of the CCRC entry fee that is considered a medical expense.
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