HSA Health Savings Account –  lower premiums and  Tax Deductions?

What’s on this page? 

• HSA Guidebook
  • Brochures
  • Qualifying Medical & Dental Expenses
  • Contribution limits
  • HSA Calculators
• HSA Banks & Administrators
• IRS Form 8889 HSA Deduction Embedded Deductible

IRS Publication 502 pdf * html

Medical & Dental #Expenses

• Aetna Listing of HSA allowable expense
• Corona Virus Costs IRS HDHP
• Can one pay Health Insurance Premiums from an HSA?
• Medical Necessity?
  • The Tax Definition of "Medical Care:" A Critique of the Startling IRS The Tax Definition of "Medical Care:" A Critique of the Startling IRS Arguments in Arguments in O'Donnabhain V. Commissioner 
• Insurance Premiums? Deductibility?  Publication 502
  • Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care.
  • Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract.
  • Turbo Tax  
  • Schedule A 1040 Itemized Deductions  

HSA’s IRS Publication 969

• Tax Estimating & HSA Tools
• Contributions if spouse is over 65 – On Medicare?

CORE HSA Health Savings Plan + §125 POP Cafeteria Plan

#Online Calculators

• HSA Bank – Is an HSA Right for me?
  • HSA Savings Calculator Tax Savings & Growth
• IRS Withholding Calculator
• Tax Estimating Tools 

How Premiums and Deductibles Work
VIDEO

FAQ’s 

• Question Can one pay Health Insurance Premiums from an HSA?
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• Answer Yes???, however the rules get technical and you really need to check with your CPA for your specific situation. In my own case, I didn’t think they were as that’s what my own CPA said for MY situation, as I can deduct premiums as a business expense.
  • Paying for some insurance premiums
  • (IRC Sec. 223(d)(2)(C); IRS Notice 2004-2 Q&A 27; IRS Notice 2005-59 Q&A 29) Generally, you cannot use your HSA to pay medical insurance premiums, but there are some exceptions.
    • Medicare premiums
    • Once you are 65 and eligible for Medicare, you can use your HSA to pay Medicare premiums (A, B, C, and D), out-of-pocket expenses that Medicare does not pay, and Medicare HMO premiums.
    • You cannot pay Medigap premiums with your HSA. Medigap is insurance that individuals can buy to cover out-of-pocket costs that are not covered by Medicare.
    • Premiums for employer-based coverage after age 65
    • If you are 65 or older and still work, you can pay your share of premiums for employer-based coverage out of your HSA (you cannot pay for these premiums before age 65).
    • If you are 65 or older and do not work, you can pay your share of any premiums your employer requires you to pay from your HSA for employer-sponsored retiree healthcare coverage.
    • Premiums when you are unemployed
    • You can pay for healthcare coverage while receiving unemployment compensation under federal or state law.
    • You can also pay COBRA premiums with HSA dollars if you are eligible for COBRA benefits.
  • Long-term care insurance
    • You may use your HSA to pay premiums for qualified long-term care insurance. To be qualified, a long-term care insurance plan must meet criteria determined by federal law (see IRS Publication 969). guidebook on HSA page 73
    • Here’s a cut & paste from IRS Publication 502
  • Insurance Premiums
    • However, in publication 502 they are qualified Medical & Dental Expenses
    • You can include in medical expenses insurance premiums you pay for policies that cover medical care. You can’t include in medical expenses insurance premiums that were paid and for which you are claiming a credit or deduction. Medical care policies can provide payment for treatment that includes:
    • Hospitalization, surgical services, X-rays;
      Prescription drugs and insulin;
      Dental care;
      Replacement of lost or damaged contact lenses; and
      Long-term care (subject to additional limitations).
    • Does your employer pay your premiums?
  • Medicare B
  • Medicare B Out patient & doctor visits is a supplemental medical insurance. Premiums you pay for Medicare B are a medical expense.
  • Medicare D Rx Prescriptions
    • Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. You can include as a medical expense premiums you pay for Medicare D.

Resources & Links

• High-Deductible Health Plans Make Income Inequality Worse
  They can leave patients with crippling medical bills. Why are high-deductible insurance plans becoming so popular with employers?
• Concerns rising about drug management in HDHPs
  Employees are dissatisfied with this aspect of HDHPs and employers are starting to pay attention. 
• Effect on premiums ‘relatively small’ when expanding pre-deductible coverage to HSA plans, study finds
• FSA vs. HSA: What’s The Difference?
• Give Americans the right to save on health care

FAQ

• Question If my Insurance Company refuses to pay a claim, stating it wasn’t medically necessary, out of network or a Rx not in the formulary, can I pay it out of my HSA?
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• ANSWER It looks that way. Please note we are not attorney’s or CPA’s.
  • What Are Medical Expenses?
    • Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.
  • Medical care expenses must be primarily to alleviate or prevent a physical or mental disability or illness. They don’t include expenses that are merely beneficial to general health, such as vitamins or a vacation.
    • (2)Qualified medical expenses
    • (A)In general The term “qualified medical expenses” means, with respect to an account beneficiary, amounts paid by such beneficiary for medical care (as defined in section 213(d))
    • (d)Definitions For purposes of this section—
      (1)The term “medical care” means amounts paid—
      • (A)for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,
      • (B)for transportation primarily for and essential to medical care referred to in subparagraph (A), https://www.law.cornell.edu/uscode/text/26/213
    • for such individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual, but only to the extent such amounts are not compensated for by insurance or otherwise. Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin. https://www.law.cornell.edu/uscode/text/26/223
    • Our webpage on Medical Necessity
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  • ISSUE
    Are amounts paid by individuals for breast reconstruction surgery, vision correction surgery, and teeth whitening medical care expenses within the meaning of § 213(d) and deductible under § 213 of the Internal Revenue Code?
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  • FACTS
    Taxpayer A undergoes mastectomy surgery that removes a breast as part of treatment for cancer and pays a surgeon to reconstruct the breast. Taxpayer B wears glasses to correct myopia and pays a doctor to perform laser eye surgery to correct the myopia. Taxpayer C’s teeth are discolored as a result of age. C pays a dentist to perform a teeth-whitening procedure. A, B, and C are not compensated for their expenses by insurance or otherwise.
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  • HOLDING
    Amounts paid by individuals for breast reconstruction surgery following a mastectomy for cancer and for vision correction surgery are medical care expenses under § 213(d) and are deductible under § 213 (subject to the limitations of that section). Amounts paid by individuals to whiten teeth discolored as a result of age are not medical care expenses under § 213(d) and are not deductible.
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  • The qualified medical expenses are broader than what most health plans cover
  • 78 Page Law Journal discussion
  • See publication 502 Medical & Dental Expenses

FAQ  

Employer Administered Plans

• Question  What are the administration requirements for an employer that has an HSA for employees?
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• Question Are Employer contributions to HSA for adult dependents spouses or children under age 26 who filing their own tax returns deductible?
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• Question  Are employer contributions to the HSA of an employee’s spouse (who is not an employee of this employer) excluded from the employee’s gross income and wages?
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• Answer  No. The exclusion under §106(d)(1) is limited to contributions by an employer to the HSA of an employee who is an eligible individual. Any contribution by an employer to the HSA of a non-employee (e.g., a spouse of an employee or any other individual), including salary reduction amounts made through a § 125 cafeteria plan, must be included in the gross income and wages of the employee. Notice 2008-59, 2008-29 I.R.B. 123, questions 23 through 27
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• Question I am employer that funds a HDHP [High Deductible Health Plan] and HSA’s [Health Savings Accounts] for all employees.
• Have employee with an adult child who can no longer be considered a dependent.
• Adult child needs to open her own HSA but is still covered on HDHP for two more years.
• Can employer contribute to adult child’s HSA? If so, are there any tax advantages?
• As the employer, I have employee that has an adult child who needs to set up her own HSA account because she graduated college and got married. Adult child is covered on parent’s HDHP funded by my company. Can employer contribute to adult child’s account? If so, does employer receive any tax advantage?
• I have been all over the internet for two days about this. Yes adult child is 23, graduated college, married and is living on her own. I understand she can not file a joint tax return in order to remain eligible to fund the HSA. I am not able to find information on whether the employer can fund adult child’s HSA if covered under the employer’s HDHP.
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• Qualifying for an HSA
• To be an eligible individual and qualify for an HSA, you must meet the following requirements.
• You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
• You have no other health coverage except what is permitted under Other health coverage, later.
• You are not enrolled in Medicare.
• You cannot be claimed as a dependent on someone else’s tax return. IRS Publication 969 Page 3
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• High deductible health plan (HDHP).
• An HDHP has:
  • The  table  above shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHP 
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• Employer Contributions
  • You can make contributions to your employees’ HSAs.
• Does this mean employee’s HSA, but not dependents?
• You deduct the contributions on your business income tax return for the year in which you make the contributions. If the contribution is allocated to the prior year, you still deduct it in the year in which you made the contribution. IRS # 969
• Links & Resources
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• No permission or authorization from the IRS is necessary to establish an HSA. You set up an HSA with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. The HSA can be established through a trustee that is different from your health plan provider.
• you have to report the distribution on Form 8889.
  https://www.irs.gov/pub/irs-pdf/p969.pdf
• See the HSA Guidebook above