ACA and HSA question

[RetiredAndLovingIt]

If you are receiving Social Security that is also included in ACA MAGI. And it's not just the taxable portion, it's all of it.

No social security yet but I might want to be upping the Roth Conversions in future since only a few years to go.

Thanks for the info.

 

[targatom2019]

Just FYI, for state tax purposes, in California your HSA is just another taxable investment account. You cannot deduct the contributions from your income and you will pay tax on the dividends and capital gains.

Really, I did not know that ? so there no good reason to set up HSA account in California.

 

[cathy63]

Am I calculating my MAGI correctly?

Savings & CD interest 10,000
Roth Conversion 20,000
HSA - 4,550 3500 +1K catchup 60 years old, never had an HSA

MAGI ===== $25,450
* I also got a huge tax refund last year using the standard deduction, hopefully that doe not come into play

$3500 + $1K = $4500, not $4550

With this change, your MAGI would be $25,500, not $25,450.

Thanks, good catch. The 3500 is a typo, it should be $3550

Well, now I am really confused. Are you asking about an HSA contribution for 2019 or 2020?

If it's for 2019, then the max is $3500 + $1000 and last year's refund on your state return doesn't matter because you didn't itemize.

If it's for 2020, then the max will be $3550 + $1000 and your state refund from your 2018 return will be irrelevant. Your 2019 state refund will matter if you itemize on your 2019 federal return.

 

[cathy63]

Really, I did not know that ? so there no good reason to set up HSA account in California.

Well, you still get all the Federal benefits. It's worthwhile for us.

 

[RetiredAndLovingIt]

Well, now I am really confused. Are you asking about an HSA contribution for 2019 or 2020?

If it's for 2019, then the max is $3500 + $1000 and last year's refund on your state return doesn't matter because you didn't itemize.

If it's for 2020, then the max will be $3550 + $1000 and your state refund from your 2018 return will be irrelevant. Your 2019 state refund will matter if you itemize on your 2019 federal return.

Oops, sorry about that, sometimes my brain goes a mile a minute and I assume everyone else knows what I'm thinking when I change gears in the middle of a thought

For 2020, I'm considering the HSA account and need to sign up for Covered California ASAP which prompted my question. At the same time I'm about to run Taxcaster for my 2019 taxes to make sure I'm where I need to be income level and suddenly the tax refund from last year popped into my head so I mentioned it without also stating that I was now talking about a different year. This is my first year on ACA and I'm so panicked that I've screwed something up and will owe more than I'm expecting. I was the same last year at this time, it's just fear of the unknown, once I've filed my taxes and it all works out, I'll be fine and a lot more confident for next year. Thanks for your help, you've answered many questions that I've asked in great detail. This website has been a tremendous help this year to me and I've learned so much.

 

[Born2Fish]

I think of an HSA as the ability to same more than the Roth limits where future income/growth is tax-free like a Roth.... but with an additional limitation that the money be spent on health care services or some forms of health insurance.

We have yet to take a penny out of our HSAs and they are now six-figures, invested in a broad based domestic equity fund and growing tax free.

I am curious who handles your HSA?

PB - my HSA is with a bank that does not have the investment option you mentioned. They pay a miniscule interest amount.

I'd like to be able to invest as you do.

 

[RunningBum]

Fidelity offers a no-fee HSA with some good investment options. I moved mine there. I'm over halfway to 6 figures, which I guess is good since I'm single. I had it in my credit union paying 2% for a few years since they were no fee, rare at the time, but once it got big enough I looked for better investment options.

 

[Smitty700]

Really, I did not know that ? so there no good reason to set up HSA account in California.

I'm not in CA, but HSAs are exempt from federal taxation in every state, so that may provide a good reason to set up an HSA in CA.

 

[pb4uski]

I am curious who handles your HSA?

PB - my HSA is with a bank that does not have the investment option you mentioned. They pay a miniscule interest amount.

I'd like to be able to invest as you do.

Fidelity now offers HSAs.

 

[bingybear]

Your insurance must be HSA qualified to contribute to an HSA. You may have one open from an earlier year but you can't make a contribution unless your current insurance is an HSA qualified plan.

An insurance plan may say HSA in it's title. Or it will state that it's HSA qualified in it's documents or summary.

One caveat, if you go for deep subsidies the CSR's can make the plan no longer HSA compatible. This may not be obvious as first glance.