hsa tax

You don't pay taxes on money going into your HSA. Some HSAs pay interest on the unused money in your account or invest the money in mutual funds or other. Health Savings Accounts (HSAs) offer three key tax benefits. It's important to remember Tax-free payments from your HSA for qualified medical expenses. If you're looking for ways to save money on your tax return, your health savings account (HSA) is a great investment tool for doing just that.

Hsa tax -

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin, 1789



But was this illustrious founding father the first to introduce this now commonly known concept? The Yale Book of Quotations shows that Christopher Bullock said in 1716, “Tis impossible to be sure of anything but Death and Taxes.” And only eight years later, Edward Ward stated that “Death and Taxes, they are certain.”

Regardless of the origin, the fact that this sentiment still rings true hundreds of years later proves the perpetuation of the inevitable: the majority of taxes are unavoidable, even when it comes to the financial burden associated with our health itself.

Fortunately, there are multiple options available for those seeking a tax-advantageous safety net of sorts — two of the most common are a Health Savings Account (HSA) or a Flexible Spending Account (FSA).

Breaking it down: What is the difference between FSA and HSA?

First, it’s important to note that both types of accounts serve to allocate pre-tax dollars to be set aside for specified purposes — including (but not limited to) medical, vision, and dental expenses you may incur throughout the term of your given plan.

  • HSAs are accounts you set up yourself. You can set up an account at your bank or credit union, for example. With this account, you can keep it no matter where you go or where you work (or if you work at all). You — and possibly your employer — contribute to the account throughout the year. The only stipulation is you must have a High Deductible Health Plan (HDHP) to have an HSA. Further, funds in an HSA can be rolled over each year, making it a smart choice if you plan on long-term savings.

Once your HSA is set up, you can allocate additional money to the account with automatic deductions from your paycheck, and all funds contributed are tax deductible. An HSA is also a good consideration for those who wish to carry their plan and funds with them, even if they choose to pursue a career with a different employer.

  • Your employer owns your health FSA, and both you and your employer can fund it. One of the key benefits of an FSA is that funds can be utilized for childcare expenses in addition to products and services related to your health. This type of plan is, however, a use-it or lose-it arrangement. There is a rollover provision, though. Up to $500 of your unused FSA funds can be rolled over to the next year. If you contribute more throughout the year than you’re able to spend, you may find yourself scrambling to make doctor’s appointments in December to use up what you’ve put into your FSA.

As is the case with an HSA, you can apply funds to your FSA from your gross pay, which means that what every dollar you put in is considered a tax-free contribution. In addition, you’re not likely to owe taxes on any withdrawals as long as you use the funds strictly for qualified expenses.

Note: Self-employed filers are able to open an HSA but not an FSA.

How do health accounts help save on your taxes?

When you make qualified contributions to an HSA or health FSA, you can take a deduction for the amount of your contribution (or your contributions can reduce your taxable income on Form W-2). Either way, your income tax bill goes down.

If your employer makes qualified contributions for you, the amount of their contributions is not taxable.

Note: Health account contributions do not reduce your income tax subject to Social Security and Medicare tax.

Why not take a tax deduction for medical expenses instead?

Instead of setting up a health account, you could pay for your medical expenses with after-tax dollars and take a deduction. However, there’s one major problem with that.

You can only deduct medical expenses to the extent they exceed 7.5 percent of your adjusted gross income (AGI).

There goes most or all of your deduction. If you qualify for a health account or other plan, it’s usually well worth the trouble to set it up and use it for any qualified medical expense needs that arise throughout the tax year.

Contributing to an FSA or HSA can be a game changer.

Even those with the most robust medical, vision, or dental insurance policies may still find themselves wondering what might happen if their health plan fails to cover an unexpected expense. Depending on your individual circumstances, an HSA or FSA may offer the peace of mind you seek for yourself and your family — as both a safety net in times of need and a welcome break for at least some of those unavoidable taxes.

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Источник: https://blog.taxact.com/hsa-vs-fsa-how-does-your-health-plan-affect-your-taxes/

Health Savings Account (HSA) Tax Deduction Rules & Benefits

Contributing to a Health Savings Account can help you lower your taxable income

Part of your preparation for tax season should include an inventory of all deductions for which you might be eligible. A review of the costs associated with each key area of your life, including work, education, children, and health, can help clarify areas that may help reduce your taxable income. A significant deduction source is a health savings account or HSA.

What is a Health Savings Account?

An HSA is a tax-exempt account used to pay or reimburse qualified medical expenses that generally would be eligible for the medical and dental expenses deduction. The amounts contributed to an HSA gain interest tax-free, and the account stays with you even if you change employers or leave the workforce. Unused funds carry over to the next year and there is no time limit on when the funds must be used, unlike a Flexible Spending Account in which funds are forfeited at the end of the year.

An HSA is set up by a qualified entity such as a bank, insurance company, or anyone approved by the IRS to be a trustee of Individual Retirement Arrangements (IRA). HSAs can only be established for individuals who qualify. There is no such thing as a joint HSA for married couples.

Are HSA contributions tax deductible?

In short, contributions to an HSA made by you or your employer may be claimed as tax deductions, even if you don’t itemize deductions on a Schedule A (Form 1040). Additionally, contributions made by your employer may be tax-free and excluded from your gross income.

Who qualifies for an HSA?

You must meet the following criteria to qualify for an HSA account: 

  • You are covered by a high-deductible health plan (HDHP) on the first day of the month
  • You have no other health coverage except worker’s compensation, insurance for a specific disease or illness, a fixed amount of coverage per day for hospitalization
  • You are not enrolled in Medicare
  • You can’t be claimed as a dependent on someone else’s tax return

HSA contribution limits in 2020

The maximum contribution amounts for 2020 are $3,550 for individuals and $7,100 for families. Taxpayers 55 years of age and older are allowed an additional “catch up” contribution amount of $1,000.

HSA tax benefits

  • Contributions to your HSA grow interest tax-free
  • If you make contributions on your own you may be able to claim the HSA tax deduction when you file, even if you don’t itemize deductions.
  • If your employer contributes to your HSA plan through payroll deductions, those contributions go in tax-free, reducing your gross annual income.
  • If you are considering year-end tax planning, you have until the April tax filing deadline to contribute to an HSA for the previous year to reduce your taxable income and potentially qualify for the HSA deduction.

How to claim the HSA tax deduction

Tax-deductible HSA contributions should be reported on Form 8889 and filed with your Form 1040 or Form 1040NR. 

If you or your employer have made contributions to your HSA plan in 2020, make sure you reap the benefits on your tax return when you file.

Источник: https://www.jacksonhewitt.com/tax-help/tax-tips-topics/health-medical/hsas/

*HSA contributions and earnings are not subject to federal taxes and not subject to state taxes in most states. A few states do not allow pretax treatment of contributions or earnings.

**Plans vary, but this is how an HSA generally works.

You cannot open an HSA if, in addition to coverage under an HSA-qualified High Deductible Health Plan ("HDHP"), you are also covered under a Health Flexible Spending Account (FSA) or an HRA or any other health coverage that is not a HDHP. Prior to enrollment with an HSA provider, you must certify that you have enrolled or plan to enroll under a HDHP and are not covered under any other health coverage that is not a HDHP. Please refer to your plan documents, including specific information on your HSA, or contact your employer for more information on what’s covered and not covered by the plan.

The HSA provider and/or trustee/custodian is solely responsible for all HSA services, transactions, and activities. Cigna and your employer are not responsible for any aspects of the HSA services, administration, or operation.

Источник: https://www.cigna.com/individuals-families/plans-services/plans-through-employer/account-based/hsa

Health savings account

American tax-advantaged medical savings account

This article is about medical savings accounts in the United States. For international uses, see medical savings account.

A health savings account (HSA) is a tax-advantagedmedical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP).[1][2] The funds contributed to an account are not subject to federal income tax at the time of deposit.[3] Unlike a flexible spending account (FSA), HSA funds roll over and accumulate year to year if they are not spent. HSAs are owned by the individual, which differentiates them from company-owned Health Reimbursement Arrangements (HRA) that are an alternate tax-deductible source of funds paired with either high-deductible health plans or standard health plans.

HSA funds may be used to pay for qualified medical expenses at any time without federal tax liability or penalty. Beginning in early 2011 over-the-counter medications could not be paid with an HSA without a doctor's prescription, although that requirement was lifted as of January 1, 2020.[4][5] Withdrawals for non-medical expenses are treated very similarly to those in an individual retirement account (IRA) in that they may provide tax advantages if taken after retirement age, and they incur penalties if taken earlier. The accounts are a component of consumer-driven health care.

Proponents of HSAs believe that they are an important reform that will help reduce the growth of health care costs and increase the efficiency of the health care system. According to proponents, HSAs encourage saving for future health care expenses, allow the patient to receive needed care without a gatekeeper to determine what benefits are allowed, and make consumers more responsible for their own health care choices through the required high-deductible health plan.[1] Opponents observe that the structure of HSAs complicates the decision of whether to obtain medical treatment, by setting it against tax liability and retirement-saving goals. There is also debate about consumer satisfaction with these plans.

History[edit]

HSAs were established as part of the Medicare Prescription Drug, Improvement, and Modernization Act, which included the enactment of Internal Revenue Code section 223,[3] effective for tax years beginning after December 31, 2003, signed into law by President George W. Bush on December 8, 2003. They were developed to replace the medical savings account system.

A survey of employers published by the Kaiser Family Foundation in September 2008 found that 8% of covered workers were enrolled in a consumer-driven health plan (including both HSAs and Health Reimbursement Accounts), up from 4% in 2006. The study found that roughly 10% of firms offered such plans to their workers. Large firms were more likely to offer a high-deductible plan (18%), but enrollment was higher in small firms (8% of covered workers, versus 4% in larger firms).[6] As of 2012, these numbers had increased. Approximately 31% of firms offering health insurance offered an HSA (26%) or an HRA (5%) option. Large firms (38%) were somewhat more likely than small (31%) firms to offer such options. 11% of covered workers were in HSAs, while 8% were in HRAs. In small companies, 24% were in high-deductible health plans vs 17% in larger firms.[7]

A survey of health insurers performed by America's Health Insurance Plans (AHIP) found that 4.5 million Americans were covered by HSA-qualified health plans as of January 2007. Of those, 3.4 million were covered through employer-sponsored plans, and 1.1 million were covered by individually purchased HSA-qualified plans. This represented an increase of 1.3 million since January 2006. In the individual market, 25% of new purchasers bought HSA-qualified plans. HSA-qualified plans represented 17% of new policies sold in the small group market and 8% of new policies sold in the large group market.[8] A follow-up survey by AHIP reported that the number of Americans covered by HSA-qualified plans had grown to 6.1 million as of January 2008 (4.6 million through employer-sponsored plans and 1.5 million covered by individually purchased HSA-qualified plans). HSA-qualified plans represented 27% of new purchases in the individual market, 31% of new enrollment in the small group market and 6% of new enrollment in the large group market.[9]

In January 2008, market research firm Celent moderated its earlier projections, citing the HSA market's "disappointing early showing," and projected 12.5 million accounts by 2012.[10] A survey published by AHIP in May 2009 found that 8 million people were covered by HSA/High-Deductible health plans in January 2009. Of them, 1.8 million were covered by individual policies and approximately 6.2 million were covered by a group plan.[11]

The Government Accountability Office (GAO) reported in April 2008 that many individuals enrolled in HSA-qualified health plans did not open tax-qualified health savings accounts, and individuals that had health savings accounts had higher incomes than others. According to the report, nationally representative surveys conducted by Blue Cross Blue Shield Association in 2005 to 2007 found that 42–49% of HSA-eligible plan enrollees did not open health savings accounts in those years. Based on an examination of Internal Revenue Service (IRS) data, GAO found that tax filers who reported health savings accounts activity had higher average incomes than other tax filers. Contributions into health savings accounts ($754 million in 2005) were roughly double withdrawals from the accounts ($366 million). Average contributions were also roughly twice average withdrawals ($2,100 versus $1,000). 41% of tax filers who made a contribution into a health savings account did not make any withdrawals; 22% withdrew more than they contributed during the year.[12]

Data released in 2012 indicate that the use of health savings accounts is increasing. AHIP reported in May 2012 that the number of people covered by an HSA-eligible high-deductible health plan more than doubled between January 2008 to January 2012 (going from 6.1 million to 13.5 million).[13] The split between group and individual plans was 11 million as opposed to 2.5 million, and the gender distribution of health savings accounts between male and female enrollees was an even 50%. Among individual plan holders, 51% were under age 40, and 49% were age 40 or over. The top five states with health savings account/high-deductible health plan enrollment were California (1 million), Texas (0.76 million), Illinois (0.72 million), Ohio (0.66 million), and Florida (0.54 million). Also, a survey released in February 2012 by J. P. Morgan Chase of the 900,000 health savings accounts that it manages indicates that contributions to health savings accounts have been steadily increasing.[14] Between 2009 and 2011, the average Chase health savings account balance rose by 11% annually, and the average employee contributions increased by 7% in 2011. Also, in 2011, 42% more dollars were transferred from health savings account cash into health savings account investment accounts than were transferred out. It is believed that the Affordable Care Act, which requires all employers with 50 or more employees to offer health insurance, may be fueling some of this growth. High-deductible health plan premiums tend to be lower, and make an attractive option for both employers and employees. Since health savings account holders are required to be covered by a high-deductible health plan, this creates an opportunity for more growth in the health savings account space.[15]

As of June 30, 2021[update], according to research conducted by Devenir, an estimated $92.9 billion is held in over 31 million health savings accounts.[16]

Operation[edit]

Deposits[edit]

Qualifying for an HSA (quotes from IRS Publication 969)

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

  • You are 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 aren't enrolled in Medicare.
  • You can't be claimed as a dependent on someone else's tax return.

For exceptions and details see IRS Publication 969.[17]

Deposits to a health savings accounts may be made by any policyholder of an HSA-eligible high-deductible health plan, by the employer, or any other person. If an employer makes deposits to such a plan on behalf of its employees, all employees must be treated equally, which is known as the non-discrimination rules. If contributions are made by a Section 125 plan, non-discrimination rules do not apply. Employers may treat full-time and part-time employees differently, and employers may treat individual and family participants differently; the treatment of employees who are not enrolled in a HSA-eligible high-deductible plan is not considered for non-discrimination purposes. As of 2007, employers may contribute more for non-highly compensated employees than highly compensated employees.

Contributions from an employer or employee may be made on a pretax basis by an employer. If that option is not available through the employer, contributions may be made on a post-tax basis and then used to decrease gross taxable income on the following year's Form 1040. Employer pre-tax contributions are not subject to Federal Insurance Contributions Act tax or Medicare taxes, but employee pre-tax contributions not made under cafeteria plans are subject to FICA and Medicare taxes.[18] Regardless of the method or tax savings associated with the deposit, the deposits may only be made for persons covered under an HSA-eligible high-deductible plan, with no other coverage beyond certain qualified additional coverage.

Initially, the annual maximum deposit to a health savings account was the lesser of the actual deductible or specified Internal Revenue Service limits. Congress later abolished the limit based on the deductible and set statutory limits for maximum contributions.[19] All contributions to a health savings account, regardless of source, count toward the annual maximum.

A catch-up provision also applies for plan participants who are age 55 or over, allowing the IRS limit to be increased. This "catch up" contribution limit was set to $500 for 2004, increasing $100 each year until it reached a maximum of $1,000 in 2009.[20] For 2019, the contribution limit was $3,500 for single or $7,000 for married couples and families.[21] For 2020, the contribution limit is $3,550 for single or $7,100 for married couples and families.[22] For 2021, the contribution limit will be $3,600 for single or $7,200 for married couples and families.[23]

All deposits to a health savings account become the property of the policyholder, regardless of the source of the deposit. Funds deposited but not withdrawn each year will carry over into the next year. Policyholders who end their HSA-eligible insurance coverage lose eligibility to deposit further funds, but funds already in the health savings account remain available for use.

The Tax Relief and Health Care Act of 2006, signed into law on December 20, 2006, added a provision allowing a taxpayer, once in their life, to rollover IRA assets into a health savings account, to fund up to one year's maximum contribution to a health savings account.

State income tax treatment of health savings accounts varies. California and New Jersey impose state income taxes on contributions, interest earned, and capital gains from health savings accounts. New Hampshire and Tennessee don't have state income taxes but they do impose a tax on dividends and interest, including health savings accounts.[24]

Contribution limits[edit]

A taxpayer can generally make contributions to a health savings account for a given tax year until the deadline for filing the individual's income tax returns for that year, which is typically April 15.[25] All contributions to a health savings account from both the employer and the employee count toward the annual maximum.

Year Contribution Limit
(Single)
Contribution Limit
(Family)
Catch-Up Contribution
(55 or older)
(Single and Family)
2004 $2,600 $5,150 $500
2005 $2,650 $5,250 $600
2006 $2,700 $5,450 $700
2007 $2,850 $5,650 $800
2008 $2,900 $5,800 $900
2009 $3,000 $5,950 $1,000
2010[26]$3,050 $6,150 $1,000
2011[27]$3,050 $6,150 $1,000
2012[28]$3,100 $6,250 $1,000
2013[29]$3,250 $6,450 $1,000
2014[30]$3,300 $6,550 $1,000
2015[31]$3,350 $6,650 $1,000
2016[32]$3,350 $6,750 $1,000
2017[33]$3,400 $6,750 $1,000
2018[34]$3,450 $6,900 $1,000
2019[35]$3,500 $7,000 $1,000
2020[22]$3,550 $7,100 $1,000
2021[23]$3,600 $7,200 $1,000

Investments[edit]

Funds in a health savings account can be invested in a manner similar to investments in an Individual Retirement Account (IRA). Investment earnings are sheltered from taxation until the money is withdrawn and can be sheltered even then, as discussed in the section below.

Investments in a health savings account can be directed by the individual. While a typical health savings account custodian may offer investments such as certificates of deposit, stocks, bonds, or mutual funds, certain financial institutions provide accounts offering alternative investments which can be made inside the health savings account. Internal Revenue Code Section 408 prohibits a health savings account to invest in collectibles and life insurance policies, but health savings accounts can have investments in real estate, precious metals, public and private stock, notes, and more.[36]

While health savings accounts can be rolled over from fund to fund, a health savings account cannot be rolled into an Individual Retirement Account or a 401(k) retirement plan, and funds from such investment vehicles cannot be rolled into health savings account, except for the one-time Individual Retirement Account transfer mentioned earlier. Unlike some employer contributions to a 401(k) retirement plan, all health savings account contributions belong to the participant immediately, regardless of the deposit source. A person contributing to a health savings account is under no obligation to contribute to an employer-sponsored health savings account, but an employer may require that payroll contributions be made only to the employer-sponsored health savings account plan.

Withdrawals[edit]

Health savings account participants do not have to obtain advance approval from their health savings account trustee or their medical insurer to withdraw funds, and their funds are not subject to income tax if they are made for qualified medical expenses. They include costs for services and items covered by the health plan but subject to cost-sharing such as a deductible and coinsurance, or co-payments as well as many other expenses not covered under medical plans, such as dental, vision and chiropractic care; durable medical equipment such as eyeglasses and hearing aids; and transportation expenses related to medical care. Over-the-counter medications were also eligible[37][38] until December 31, 2010, when the Patient Protection and Affordable Care Act stipulated HSA funds could no longer be used to buy over-the-counter drugs without a doctor's prescription. As a response to the COVID-19 pandemic, the passage of the CARES Act once again made over-the-counter drugs reimbursable without a prescription for amounts paid after Dec. 31, 2019. The CARES Act also recognized menstrual care products as medical expenses, allowing for those products to be purchased or reimbursed with HSA funds.[39]

There are several ways that funds in a health savings account can be withdrawn. Some health savings accounts include a debit card, some supply checks for account holder use, and some allow for a reimbursement process similar to medical insurance. Most health savings accounts have more than one possible method for withdrawal, and the methods available vary. Checks and debits do not have to be made payable to the provider. Funds can be withdrawn for any reason, but withdrawals that are not for documented qualified medical expenses are subject to income taxes and a 20% penalty. The 20% penalty is waived for persons who have reached the age of 65 or have become disabled at the time of the withdrawal. Then, only income tax is paid on the withdrawal and in effect, the account has grown tax-deferred. Medical expenses continue to be tax free. Prior to January 1, 2011, when new rules governing health savings accounts in the Patient Protection and Affordable Care Act went into effect, the penalty for non-qualified withdrawals was 10%.

Account holders are required to retain documentation for their qualified medical expenses. Failure to retain and provide documentation could cause the IRS to rule that withdrawals were not for qualified medical expenses and subject the taxpayer to additional penalties.[25]

There is no deadline for self-reimbursements of qualified medical expenses incurred after the health savings accounts was established. Health savings account participants can take advantage by paying for medical costs out of pocket and retaining receipts but allowing their accounts to grow tax-free. Money can then be withdrawn years later for any reason up to the value of the receipts.[25]

When a person dies, the funds in their health savings account are transferred to the beneficiary named for the account. If the beneficiary is a surviving spouse, the transfer is tax-free. If the beneficiary is not a spouse, the account stops being an health savings account, and the fair market value of the health savings account (less any unreimbursed qualified medical expenses of the decedent paid within the 1 year anniversary of his death) becomes taxable to the beneficiary in the year in which the health savings account owner dies.[17][40]

Compared to medical savings accounts[edit]

Health savings accounts are similar to medical savings account (MSA) plans that were authorized by the federal government before health savings account plans. Health savings accounts can be used with some high-deductible health plans. Health savings accounts came into being after legislation was signed by President George W. Bush on December 8, 2003. The law went into effect on January 1, 2004.

Health savings accounts differ in several ways from medical savings accounts. Perhaps the most significant difference is that employers of all sizes can offer a health savings account and insurance plan to employees. Medical savings accounts were limited to the self-employed and employers with 50 or fewer employees.

Benefits[edit]

The premium for a high-deductible health plan[41] is generally less than the premium for traditional health insurance. A higher deductible lowers the premium because the insurance company no longer pays for routine healthcare, and insurance underwriters believe that Americans who see a relationship between medical cost and their bank accounts will consume less medical care, shop for lower-cost options, and be more vigilant against excess and fraud in the health care industry. Introducing consumer-driven supply and demand and controlling inflation in health care and health insurance were among the government's goals in establishing these plans.

With health savings accounts, in catastrophic situations, the maximum out-of-pocket expense legal liability can be less than that of a traditional health plan. That is because a qualified high-deductible health plan can cover 100% after the deductible, involving no coinsurance.

Health savings accounts also give the flexibility not available in some traditional health plans to pay on a pretax basis for qualified medical expenses not covered in standard or HSA-eligible insurance plans, which may include dental, orthodontic, vision, and other approved expenses.[42][43]

Health savings accounts also have an advantage over flexible spending accounts since deposits are not necessarily tied to expenses in a particular plan or calendar year. They are automatically rolled over for future medical expenses or may be used to reimburse qualified expenses from prior years as long as the expense was qualified under a health savings account plan at the time that the expense was incurred.[44]

Over time, if medical expenses are low and contributions are made regularly to the health savings account, the account can accumulate significant assets that can be used for health care tax-free or used for retirement on a tax-deferred basis.

The high-deductible health plan, when combined with a health savings account, is the only health insurance plan option available that can possibly have a net gain of value during the year if the funds are invested in the health savings account.

A recent industry survey found that in July 2007 over 80% of health savings account plans provided first-dollar coverage for preventive care. It was true of virtually all health savings account plans offered by large employers and over 95% of the plans offered by small employers. It was also true of 59% of the plans that were purchased by individuals. In terms of Medicare, Plan F is considered a first-dollar coverage plan, as it has no out-of-pocket expenses on covered services.[45]

All of the plans offered first-dollar preventive care benefits included annual physicals, immunizations, well-baby and well-child care, mammograms, and Pap tests; 90% included prostate cancer screenings, and 80% included colon cancer screenings.[46]

They in fact encourage customers of all backgrounds to constrain costly spending and obtain more preventive health care. In Indiana, those with health savings accounts are 98% satisfied.[47]

Criticism[edit]

Some consumer organizations, such as Consumers Union[citation needed], and many medical organizations, such as the American Public Health Association, oppose health savings accounts because, in their opinion, they benefit only healthy, younger people, and make the health care system more expensive for everyone else. According to Stanford economist Victor Fuchs, "The main effect of putting more of it on the consumer is to reduce the social redistributive element of insurance."[48]

Critics contend that low-income people, who are more likely to be uninsured, do not earn enough to benefit from the tax breaks offered by health savings accounts. These tax breaks are too modest, when compared to the actual cost of insurance, to persuade significant numbers to buy this coverage.[49]

One industry study matched health savings account holders to the neighborhood income ("neighborhood" was defined as their census tract from the 2000 Census) and found that 3% of account holders lived in "low-income" neighborhoods (median incomes below $25,000 in 1999 dollars), 46% lived in lower-middle-income neighborhoods (median incomes between $25,000 and $50,000), 34% lived in middle-income neighborhoods (median incomes between $50,000 and $75,000), 12% lived in upper-income neighborhoods (median incomes between $75,000 and $100,000) and 5% lived in higher income neighborhoods (median incomes above $100,000).[50]

In testimony before the US Senate Finance Committee's Subcommittee on Health in 2006, advocacy group Commonwealth Fund said that all evidence to date shows that health savings accounts and high-deductible health plans worsen, rather than improve, the US health system's problems.[51]

Funds in a health savings account that are not held in savings accounts insured by the Federal Deposit Insurance Corporation are subject to market risk, as is any other investment. While the potential upside from investment gains can be viewed as a benefit, the subsequent downside, as well as the possibility of capital loss, may make the health savings account a poor option for some.[52] And information about the maintenance fees, interest rates and investment lineups of health savings accounts is not easy to find.[53]

Despite the criticism, assets in health savings accounts continue to grow, and providers are lowering fees.[54] In the first half of 2020 assets grew by approximately 12% according to an analysis by Morningstar.[55]

Consumer satisfaction[edit]

Consumer satisfaction results have been mixed. While a 2005 survey by the Blue Cross and Blue Shield Association found widespread satisfaction among health savings account customers,[56] a survey published in 2007 by employee benefits consultants Towers Perrin came to the opposite conclusion; it found that employees currently enrolled in such plans were significantly less satisfied with many elements of the health benefit plan compared to those enrolled in traditional health benefit plans.[57]

In 2006, a Government Accountability Office report concluded: "HSA-eligible plan enrollees who participated in GAO's focus groups generally reported positive experiences, but most would not recommend the plans to all consumers. Few participants reported researching cost before obtaining health care services, although many researched the cost of prescription drugs. Most participants were satisfied with their HSA-eligible plans and would recommend them to healthy consumers, but not to those who use maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible."[58]

According to the Commonwealth Fund, early experience with HSA-eligible high-deductible health plans reveals low satisfaction, high out-of-pocket costs, and cost-related access problems.[51] A survey conducted with the Employee Benefit Research Institute found that people enrolled in HSA-eligible high-deductible health plans were much less satisfied with many aspects of their health care than adults in more comprehensive plans.[59]

  • People in these plans allocate substantial amounts of income to their health care, especially those who have poorer health or lower incomes.
  • Adults in high-deductible health plans are far more likely to delay or avoid getting needed care, or to skip medications, because of the cost. Problems are particularly pronounced among those with poorer health or lower incomes.
  • Few Americans in any health plan have the information they need to make decisions. Just 12 to 16 percent of insured adults have information from their health plan about the quality or cost of care provided by their doctors and hospitals.

Some policy analysts say that consumer satisfaction doesn't reflect quality of health care. Researchers at RAND Corporation and Department of Veterans Affairs asked 236 vulnerable elderly patients at two managed care plans to rate their care, then examined care in medical records, as reported in Annals of Internal Medicine. There was no correlation. "Patient ratings of health care are easy to obtain and report, but do not accurately measure the technical quality of medical care," said John T. Chan, UCLA, lead author.[60][61][62]

Health policy[edit]

According to a 2006 Zogby poll, seven in ten voters back Congressional action to allow HSA participants to pay for their insurance premiums using money in their savings plans.[63]

See also[edit]

References[edit]

  1. ^ ab"Health Savings Accounts". Health401k.com. Retrieved 2010-12-09.
  2. ^"Health Savings Accounts (HSAs)". U.S. Treasury. Retrieved 2015-12-13.
  3. ^ ab26 CFR223
  4. ^"Affordable Care Act: Questions and Answers on Over-the-Counter Medicines and Drugs". IRS. September 3, 2010. Retrieved December 9, 2010.
  5. ^Christman, Michael D. (April 10, 2020). "COVID-19 and Benefits: 'Now, a Word from Your HR Director'". National Law Review.
  6. ^"Employer Health Benefits 2007 Annual Survey"(PDF). Kaiser Family Foundation. September 2007. Retrieved 2015-05-17.
  7. ^"Employer Health Benefits 2012 Annual Survey"(PDF). Kaiser Family Foundation. September 2012. Retrieved 2015-05-17.
  8. ^Hannah Yoo, January 2007 Census Shows 4.5 Million People Covered by HSA/High-Deductible Health Plans, AHIP, April 2007
  9. ^Hannah Yoo, January 2008 Census Shows 6.1 Million People Covered by HSA/High-deductible Health Plans, America's Health Insurance Plans, April 2008
  10. ^Press Release for Report Entitled "HSAs: Moving Beyond the Growing Pains,"Archived 2011-10-05 at the Wayback Machine Celent, January 7, 2008
  11. ^Hannah Yoo, January 2009 Census Shows 8 Million People Covered by HSA/High-deductible Health Plans, America's Health Insurance Plans, May 2009
  12. ^John E. Dicken, Director, Health Care, U.S. Government Accountability Office, "Health Savings Accounts: Participation Increased and Was More Common among Individuals with Higher Incomes," Letter to Henry A. Waxman, Chairman of the House of Representatives Committee on Oversight and Government Reform and Pete Stark, Chairman of House of Representatives Subcommittee on Health Committee on Ways and Means, dated April 1, 2008
  13. ^Center for Policy Research, America's Health Insurance Plans, http://www.ahip.org/HSA2012/
  14. ^J. P. Morgan Chase, http://www.jpmorgan.com/visit/hsasnapshot
  15. ^"Health Savings Accounts". Retrieved 2016-09-02.
  16. ^"HSA Assets Approach $100 Billion Through First Half of 2021". devenir.com. Devenir Research. Retrieved 2021-09-16.
  17. ^ ab"Publication 969 (2020), Health Savings Accounts and Other Tax-Favored Health Plans | Internal Revenue Service". www.irs.gov.
  18. ^"Publication 15: (Circular E), Employer's Tax Guide"(PDF). Internal Revenue Service. 2015. p. 16. Retrieved 2015-04-01.
  19. ^"HSA Center 2012 Limits". hsacenter.com. Retrieved 2011-11-02.
  20. ^"MMA Section 223 - Health Savings Accounts". congress.gov. Retrieved 2020-11-02.
  21. ^IRS Rev. Proc. 2018-30. Retrieved June 8, 2018
  22. ^ ab"IRS Rev. Proc. 2019-22". irs.gov. Retrieved 8 May 2020.
  23. ^ ab"IRS Rev. Proc. 2020-32"(PDF). irs.gov. Retrieved 2 Nov 2020.
  24. ^"The HSA Federal State Income Taxes - HSA for America". HSAforAmerica.com. Retrieved 2020-11-02.
  25. ^ abc"IRS Publication 969". www.irs.gov. Retrieved 2011-07-19.
  26. ^"IRS Rev. Proc. 2009-29"(PDF). irs.gov. Retrieved 17 August 2017.
  27. ^"IRS Rev. Proc. 2010-22"(PDF). irs.gov. Retrieved 17 August 2017.
  28. ^"IRS Rev. Proc. 2011-32"(PDF). irs.gov. Retrieved 17 August 2017.
  29. ^"IRS Rev. Proc. 2012-26"(PDF). irs.gov. Retrieved 17 August 2017.
  30. ^"IRS Rev. Proc. 2013-25"(PDF). irs.gov. Retrieved 17 August 2017.
  31. ^"IRS Rev. Proc. 2014-30"(PDF). irs.gov. Retrieved 17 August 2017.
  32. ^"IRS Rev. Proc. 2015-30"(PDF). irs.gov. Retrieved 17 August 2017.
  33. ^"IRS Rev. Proc. 2016-28"(PDF). irs.gov. Retrieved 17 August 2017.
  34. ^"IRS Rev. Proc. 2018-27"(PDF). irs.gov. Retrieved 8 May 2018.
  35. ^"IRS Rev. Proc. 2018-30"(PDF). irs.gov. Retrieved 8 June 2018.
  36. ^"Self Directed Accounts – HSA (Health Savings Account)". New Direction Trust Company. Retrieved 2020-04-15.
  37. ^"2006 IRS Publication 502". www.irs.gov. Retrieved 2007-10-21.
  38. ^"HSA.pdf"(PDF). treasury.gov. Archived from the original(PDF) on 2007-11-20. Retrieved 17 August 2017.
  39. ^"IRS outlines changes to health care spending available under CARES Act". www.irs.gov. Retrieved 2021-04-27.
  40. ^"Can I Roll HSA Contributions Into a Roth IRA?". Finance - Zacks.
  41. ^Ponce, Ernesto. "High-Deductible Health Plans Defined". coverageoneinsurance.com/.
  42. ^"US Department of the Treasury". treas.gov. Archived from the original on 2005-02-10. Retrieved 2015-04-07.
  43. ^"HSA Basics"(PDF). treas.gov. Archived from the original(PDF) on 2007-08-14. Retrieved 17 August 2017.
  44. ^"Internal Revenue Bulletin – Notice 2004-50". irs.gov. August 16, 2004. Retrieved 2015-04-07.
  45. ^"Compare Medigap Insurance Plans for 2021". MedicareFAQ. 2020-03-03. Retrieved 2020-10-02.
  46. ^Thomas Wilder and Hannah Yoo, "A Survey of Preventive Benefits in Health Savings Account (HSA) Plans, July 2007," America's Health Insurance Plans, November 2007
  47. ^Mitch Daniels (March 1, 2010). "Mitch Daniels: Hoosiers and Health Savings Accounts". WSJ. Retrieved 2015-04-07.
  48. ^Gladwell, Malcolm (August 29, 2005). "The Moral Hazard Myth". The New Yorker. Archived from the original on June 30, 2007. Retrieved 2007-06-28.
  49. ^"Health Care Coverage in America: Understanding the Issues and Proposed Solutions"(PDF). Alliance for Health Reform. Archived from the original(PDF) on 2007-10-25. Retrieved 2007-07-10.
  50. ^Hannah Yoo and Christelle Chen, Estimated Income Characteristics of HSA Accountholders in 2008, America's Health Insurance Plans, May 2009
  51. ^ ab"Health Savings Accounts and High-Deductible Health Plans: Why They Won't Cure What Ails U.S. Health Care". cmwf.org. Retrieved 2015-04-07.
  52. ^"Health Insurance Facts | Smarter Consumers of Healthcare". Health Harbor. Retrieved 2012-09-28.
  53. ^"Top HSA Providers of 2019: Our Annual Checkup". Morningstar, Inc. Retrieved 2020-08-18.
  54. ^October 16, Michael S. Fischer

    What Is the IRS Form 8889?

    Updated for Tax Year 2021 / October 16, 2021 07:45 AM


    OVERVIEW

    Before you can deduct your contributions to a health savings account (HSA), you must prepare IRS Form 8889.


    If you are the beneficiary of a health savings account (HSA), then the IRS requires you to prepare Form 8889 with your tax return before you can deduct your contributions to the account. The purpose of the form is to report your deductible contributions, calculate the deduction, report the distributions you take to pay medical expenses and to calculate the tax you must pay on withdrawals you make for non-medical related purposes.

    How an HSA works

    An HSA allows you to make annual tax-deductible contributions up to $3,600 for individual plans or up to $7,200 for family plans (as of 2021) to help pay out-of-pocket medical expenses in the future. If you are age 55 or older, you can make an additional $1,000 "catch-up" contribution, which is also tax-deductible.

    The money grows tax-deferred for as long as it’s held in the account, and all withdrawals you make to pay for qualified medical expenses are tax-free. This means you can pay for your medical expenses with tax-free dollars. However, this money is only tax-free if you file Form 8889 with your tax return.

    Qualifying for an HSA

    Not all taxpayers are eligible to have an HSA. To qualify, you must be enrolled in a health insurance plan that imposes high deductibles that meet or exceed IRS required amounts. In addition to high deductibles, the plan must impose maximum annual out-of-pocket cost ceilings that also satisfy IRS limitations.

    If you have other “first-dollar” medical coverage, enroll in Medicare or are claimed as a dependent on another taxpayer’s return, then you aren’t eligible to use an HSA. However, disability, dental plans, vision, long-term care and catastrophic-disease policies, such as cancer insurance, will not disqualify you from having an HSA.

    Using HSA funds

    You can use the money in your HSA for a variety of health-related expenses for yourself, your spouse or your dependents, including preventative care, surgery, and even orthodontics. However, you cannot use the money in an HSA to pay medical insurance premiums unless you are paying COBRA coverage after losing your job, or paying premiums while collecting unemployment.

    You are allowed to use the money to pay for long-term care insurance and, if enrolled in Medicare, to pay deductibles, co-pays and coinsurance. You must pay tax on any withdrawals you make for non-medical purposes plus an additional 10-percent penalty.

    Preparing Form 8889

    You must always file a Form 8889 in any year you or an employer contributes money to your HSA or you make withdrawals from the account. The deduction you calculate on Form 8889 is taken on the first page of your income tax return. Since this is an adjustment to your income, there is no requirement that you be eligible to itemize deductions to claim it.

    Remember, with TurboTax, we'll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.


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    The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

    Источник: https://turbotax.intuit.com/tax-tips/health-care/what-is-the-irs-form-8889/L8hRNHx4o

    HSA Tax Center

    Q. Which forms do I need to file my taxes?

    A. There are three tax forms associated with health savings accounts (HSAs): IRS Form 1099-SA, 5498-SA and IRS Form 8889.

    Please use the information in your 1099-SA form, available online, to fill out IRS tax form 8889. Form 8889 is the only one you need to submit with your taxes. You can find IRS tax form 8889 in the “Statements & Docs” section after signing in to your account.

    • IRS form 1099-SA shows the amount of money you spent from your HSA during the tax year.
    • IRS form 5498-SA shows the amount of money deposited into your HSA for the tax year.
    • IRS form 8889 is the form you fill out and submit with your tax return.

    Q. When will I get my tax forms?

    A. IRS Form 1099-SA is typically available at the end of January. It will be posted to your account and mailed, if elected. IRS Form 8889 can be downloaded from IRS.gov at any time.

    IRS Form 5498-SA is typically available around the end of January. If you contribute in the new year for the previous tax year, you will also get another 5498-SA form in May.

    Qualcomm employees receive an investment report that reflects information for each investment the account holder has owned for the year to help assist with filing their taxes.  Optum Bank will mail the report in to all Qualcomm employees.

    Q. Why doesn’t my W-2 match the Form 5498-SA?

    A. If the contributions on your W-2 don’t match your Form 5498-SA, you likely made after-tax contributions or contributions between January 1 and tax day for the previous tax year.

    Q. What do I need to report to the IRS?

    A. In addition to the forms noted above, keep track of your spending in case you have to prove you used funds for qualified medical expenses. It’s up to you to keep track of your expenses and report any funds you use for nonqualified medical expenses.

    Источник: https://www.optumbank.com/qualcomm/tax-advantaged-accounts/health-savings-accounts/tax-center.html

    Health savings account

    American tax-advantaged medical savings account

    This article is about medical savings accounts in the United States. For international uses, see medical savings account.

    A health savings account (HSA) is a tax-advantagedmedical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP).[1][2] The funds contributed to an account are not subject to federal income tax at the time of deposit.[3] Unlike a flexible spending account (FSA), HSA funds roll over and accumulate year to year if they are not spent. HSAs are owned by the individual, which differentiates them from company-owned Health Reimbursement Arrangements (HRA) that are an alternate tax-deductible source of funds paired with either high-deductible health plans or standard health plans.

    HSA funds may be used to pay for qualified medical expenses at any time without federal tax liability or penalty. Beginning in early 2011 over-the-counter medications could not be paid with an HSA without a doctor's prescription, although that requirement was lifted as of January 1, 2020.[4][5] Withdrawals for non-medical expenses are treated very similarly to those in an individual retirement account (IRA) in that they may provide tax advantages if taken after retirement age, and they incur penalties if taken earlier. The accounts are a component of consumer-driven health care.

    Proponents of HSAs believe that they are an important reform that will help reduce the growth of health care costs and increase the efficiency of the health care system. According to homes for sale in glen haven colorado, HSAs encourage saving for future health care expenses, allow the patient to receive needed care without a gatekeeper to determine what benefits are allowed, and make consumers more responsible for their own health care choices through the required high-deductible health plan.[1] Opponents observe that the structure of HSAs complicates the decision of whether to obtain medical treatment, by setting it against tax liability and retirement-saving goals. There is also debate about consumer satisfaction with these plans.

    History[edit]

    HSAs were established as part of the Medicare Prescription Drug, Improvement, and Modernization Act, which included the enactment of Internal Revenue Code section 223,[3] effective for tax years beginning after December 31, 2003, signed into law by President George W. Bush on December 8, 2003. They were developed to replace the medical savings account system.

    A survey of employers published by the Kaiser Family Foundation in September 2008 found that 8% of covered workers were enrolled in a consumer-driven health plan (including both HSAs and Health Reimbursement Accounts), up from 4% in 2006. The study found that roughly 10% of firms offered such plans to their workers. Large firms were more likely to offer a high-deductible plan (18%), but enrollment was higher in small firms (8% of covered workers, versus 4% in larger firms).[6] As of 2012, these numbers had increased. Approximately 31% of firms offering health insurance offered an HSA (26%) or an HRA (5%) option. Large firms (38%) were somewhat more likely than small (31%) firms to offer such options. 11% of covered workers were in HSAs, while 8% were in HRAs. In small companies, 24% were phoebe fast times at ridgemont high high-deductible health plans vs 17% in larger firms.[7]

    A survey of health insurers performed by America's Health Insurance Plans (AHIP) found that 4.5 million Americans were covered by HSA-qualified health plans as of January 2007. Of those, 3.4 million were covered through employer-sponsored plans, and 1.1 million were covered by individually purchased HSA-qualified plans. This represented an increase of 1.3 million since January 2006. In the individual market, 25% of new purchasers bought HSA-qualified plans. HSA-qualified plans represented 17% of new policies sold in the small group market and 8% of new policies sold in the large group market.[8] A follow-up survey by AHIP reported that the number of Americans covered by HSA-qualified plans had grown to 6.1 million as of January 2008 (4.6 million through employer-sponsored plans and 1.5 million covered by individually purchased HSA-qualified plans). HSA-qualified plans represented 27% of new purchases in the individual market, 31% of new enrollment in the small group market and 6% of new enrollment in the large group market.[9]

    In January 2008, market research firm Celent moderated its earlier projections, citing the HSA market's "disappointing early showing," and projected 12.5 million accounts by 2012.[10] A survey published by AHIP in May 2009 found that 8 million people were covered by HSA/High-Deductible health plans in January 2009. Of them, 1.8 million were covered by individual policies and approximately 6.2 million were covered by a group plan.[11]

    The Government Accountability Office (GAO) reported in April 2008 that many individuals enrolled in HSA-qualified health plans did not open tax-qualified health savings accounts, and hsa tax that had health savings accounts had higher incomes than others. According to the report, nationally representative surveys conducted by Blue Cross Blue Shield Association in 2005 to 2007 found that 42–49% of HSA-eligible plan enrollees did not open health savings accounts in those years. Based on an examination of Internal Revenue Service (IRS) data, GAO found that tax filers who reported health savings accounts activity had higher average incomes than other tax filers. Contributions into health savings accounts ($754 million in 2005) were roughly double withdrawals from the accounts ($366 million). Average contributions were also roughly twice average withdrawals ($2,100 versus $1,000). 41% of tax filers who made a contribution into a health savings account did not make any withdrawals; 22% withdrew more than they contributed during the year.[12]

    Data released in 2012 indicate that the use of health savings accounts is increasing. AHIP reported in May 2012 that the number of people covered by an HSA-eligible high-deductible health plan more than doubled between January 2008 to January 2012 (going from 6.1 million to 13.5 million).[13] The split between group and individual plans was 11 million as opposed to 2.5 million, and the gender distribution of health savings accounts between male and female enrollees was an even 50%. Among individual plan holders, 51% were under age 40, and 49% were age 40 or over. The top five states with health savings account/high-deductible health plan enrollment were California (1 million), Texas (0.76 million), Illinois (0.72 million), Ohio (0.66 million), and Florida (0.54 million). Also, a survey released in February 2012 by J. P. Morgan Chase of the 900,000 health savings accounts that it manages indicates that contributions to health savings accounts have been steadily increasing.[14] Between 2009 and 2011, the average Chase health savings account balance rose by 11% annually, and the average employee contributions increased by 7% in 2011. Also, in 2011, 42% more dollars were transferred from health savings account cash into health savings account investment accounts than were transferred out. It is believed that the Affordable Hsa tax Act, which requires all employers with 50 or more employees to offer health insurance, may be fueling some of this growth. High-deductible health plan premiums tend to be lower, and make an attractive option for both employers and employees. Since health savings account holders are required to be covered by a high-deductible health plan, this creates an opportunity for more growth in the health savings account space.[15]

    As of June 30, 2021[update], according to research conducted by Devenir, an estimated $92.9 billion is held in over 31 million health savings accounts.[16]

    Operation[edit]

    Deposits[edit]

    Qualifying for an HSA (quotes from IRS Publication 969)

    To be an eligible individual and qualify for an HSA, you must meet the following requirements.

    • You are 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 aren't enrolled in Medicare.
    • You can't be claimed as a dependent on someone else's tax return.

    For exceptions and details see IRS Publication 969.[17]

    Deposits to a health savings accounts may be made by any policyholder of an HSA-eligible high-deductible health plan, by the employer, or any other person. If an employer makes deposits to such a plan on behalf of its employees, all employees must be treated equally, which is known as hsa tax non-discrimination rules. If contributions are made by a Section 125 plan, non-discrimination rules do not apply. Employers may treat full-time and part-time employees differently, and employers may treat individual and family participants differently; the treatment of employees who are not enrolled in a HSA-eligible high-deductible plan is not considered for non-discrimination purposes. As of 2007, employers may contribute more for non-highly compensated employees than highly compensated employees.

    Contributions from an employer or employee may be made on a pretax basis by an employer. If that option is not available through the employer, contributions may be made on a post-tax basis and then used to decrease gross taxable income on the following year's Form 1040. Employer pre-tax contributions are not subject to Federal Insurance Contributions Act tax or Medicare taxes, but employee pre-tax contributions not made under cafeteria plans are subject to FICA and Medicare taxes.[18] Regardless of the method or tax savings associated with the deposit, the deposits may only be made for persons covered under an HSA-eligible high-deductible plan, with no other coverage beyond certain qualified additional coverage.

    Initially, the annual maximum deposit to a health savings account was the lesser of the actual deductible or specified Internal Revenue Service limits. Congress later abolished the limit based on the deductible and set statutory limits for maximum contributions.[19] All contributions to a health savings account, regardless of source, count toward the annual maximum.

    A catch-up provision also applies for plan participants who are age 55 or over, allowing the IRS limit to be increased. This "catch up" contribution limit was set to $500 for 2004, increasing $100 each year until it reached a maximum of $1,000 in 2009.[20] For 2019, the contribution limit was $3,500 for single or $7,000 for married couples and families.[21] For 2020, the contribution limit is $3,550 for single or $7,100 for married couples and families.[22] For 2021, the contribution limit will be $3,600 for single or $7,200 for married couples and families.[23]

    All deposits to a health savings account become the property of the policyholder, regardless of the source of the deposit. Funds deposited but not withdrawn each year will carry over into the next year. Policyholders who end their HSA-eligible insurance coverage lose eligibility to deposit further funds, but funds already in the health savings account remain available for use.

    The Tax Relief and Health Care Act of 2006, signed into law on December 20, 2006, added a provision allowing a taxpayer, once in their life, to rollover IRA assets into a health savings account, to fund up to one year's maximum contribution to a health savings account.

    State income tax treatment of health savings accounts varies. California and New Jersey impose state income taxes on contributions, interest earned, and capital gains from health savings accounts. New Hampshire and Tennessee don't have state income taxes but they do impose a tax on dividends and interest, including health savings accounts.[24]

    Contribution limits[edit]

    A taxpayer can generally make contributions to a health savings account for a given tax year until the deadline for filing the individual's income tax returns for that year, which is typically April 15.[25] All contributions to a health savings account from both the employer and the employee count toward the annual maximum.

    Year Contribution Limit
    (Single)
    Contribution Limit
    (Family)
    Catch-Up Contribution
    (55 or older)
    (Single and Family)
    2004 $2,600 $5,150 $500
    2005 $2,650 $5,250 $600
    2006 $2,700 $5,450 $700
    2007 $2,850 $5,650 $800
    2008 $2,900 $5,800 $900
    2009 $3,000 $5,950 $1,000
    2010[26]$3,050 $6,150 $1,000
    2011[27]$3,050 $6,150 $1,000
    2012[28]$3,100 $6,250 $1,000
    2013[29]$3,250 $6,450 $1,000
    2014[30]$3,300 $6,550 $1,000
    2015[31]$3,350 $6,650 $1,000
    2016[32]$3,350 $6,750 $1,000
    2017[33]$3,400 $6,750 $1,000
    2018[34]$3,450 $6,900 $1,000
    2019[35]$3,500 $7,000 $1,000
    2020[22]$3,550 $7,100 $1,000
    2021[23]$3,600 $7,200 $1,000

    Investments[edit]

    Funds in a health savings account can be invested in a manner similar to investments in an Individual Retirement Account (IRA). Investment earnings are sheltered from taxation until the money is withdrawn and can be sheltered even then, as best interest bearing savings accounts 2019 in the section below.

    Investments in a health savings account can be directed by the individual. While a typical health savings account custodian may offer investments such as certificates of deposit, stocks, bonds, or mutual funds, certain financial institutions provide accounts offering alternative investments which can be made inside the health savings account. Internal Revenue Code Section 408 prohibits a health savings account to invest in collectibles and life insurance policies, but health savings accounts can have investments in real estate, precious metals, public and private stock, notes, and more.[36]

    While health savings accounts can be rolled over from fund to fund, a health savings account cannot be rolled into an Individual Retirement Account or a 401(k) retirement plan, and funds from such investment vehicles cannot be rolled into health savings account, except for the one-time Individual Retirement Account transfer mentioned earlier. Unlike some employer contributions to a 401(k) retirement plan, all health savings account contributions belong to the participant immediately, regardless of the deposit source. A person contributing to a health savings account is under no obligation to contribute to an employer-sponsored health savings account, but an employer may require that payroll contributions be made only to the employer-sponsored health savings account plan.

    Withdrawals[edit]

    Health savings account participants do not have to obtain advance approval from their health savings account trustee or their medical insurer to withdraw funds, and their funds are not subject to income tax if they are made for qualified medical expenses. They include costs for services and items covered by the health plan but subject to cost-sharing such as a deductible and coinsurance, or co-payments as well as many other expenses not covered under medical plans, such as dental, vision and chiropractic care; durable medical equipment such as eyeglasses and hearing aids; and transportation expenses related to medical care. Over-the-counter medications were also eligible[37][38] until December 31, 2010, when the Patient Protection and Affordable Care Act stipulated HSA funds could no longer be used to buy over-the-counter drugs without a doctor's prescription. As a response to the COVID-19 pandemic, the passage of the CARES Act once again made over-the-counter drugs reimbursable without a prescription for amounts paid after Dec. 31, 2019. The CARES Act also recognized menstrual care products as medical expenses, allowing for those products to be purchased or reimbursed with HSA funds.[39]

    There are several ways that funds in a health savings account can be withdrawn. Some health savings accounts include a debit card, some supply checks for account holder use, and some allow for a reimbursement process similar to medical insurance. Most health savings accounts have more than one possible method for withdrawal, and the methods available vary. Checks and debits do not have to be made payable to the provider. Funds can be withdrawn for any reason, but withdrawals that are not for documented qualified medical expenses are subject to income taxes and a 20% penalty. The 20% penalty is waived for persons who have reached the age of 65 or have become disabled at the time of the withdrawal. Then, only income tax is paid on the withdrawal and in effect, the account has grown tax-deferred. Medical expenses continue to be tax free. Prior to January 1, 2011, when new rules governing health savings accounts in the Patient Protection and Affordable Care Act went into effect, the penalty for non-qualified withdrawals was 10%.

    Account holders are required to retain documentation for their qualified medical expenses. Failure to retain and provide documentation could cause the IRS to rule that withdrawals were not for qualified medical expenses and subject the taxpayer to additional penalties.[25]

    There is no deadline for self-reimbursements of qualified medical expenses incurred after the health savings accounts was established. Health savings account participants can take advantage by paying hsa tax medical costs out of pocket and retaining receipts but allowing their accounts to grow tax-free. Money can then be withdrawn years later for any reason up to the value of the receipts.[25]

    When a person dies, the funds in their health savings account are transferred to the beneficiary named for the account. If the beneficiary is a surviving spouse, the transfer is tax-free. If the beneficiary is not a spouse, the account stops being an health savings account, and the fair market value of the health savings account (less any unreimbursed qualified medical expenses of the decedent paid within the 1 year anniversary of his death) becomes taxable to the beneficiary in the year in which the health savings account owner dies.[17][40]

    Compared to medical savings accounts[edit]

    Health savings accounts are similar to medical savings account (MSA) plans that were authorized by the federal government before health savings account plans. Health savings accounts can be used with some high-deductible health plans. Health savings accounts came into being after legislation was signed by President George W. Bush on December 8, 2003. The law went into effect on January carolina alliance bank merger, 2004.

    Health savings accounts differ in several ways from medical savings accounts. Perhaps the most significant difference is that employers of all sizes can offer a health savings account and insurance plan to employees. Medical savings accounts were limited to the self-employed and employers with 50 or fewer employees.

    Benefits[edit]

    The premium for a high-deductible health plan[41] is generally less than the premium for traditional health insurance. A higher deductible lowers the premium because the insurance company no longer pays for routine healthcare, and insurance underwriters believe that Americans who see a relationship between medical cost and their bank accounts will consume less medical care, shop for lower-cost options, and be more vigilant against excess and fraud in the health care industry. Introducing consumer-driven supply and demand and controlling inflation in health online t shirt printing website and health insurance were among the government's goals in establishing these plans.

    With health savings accounts, in catastrophic situations, the maximum out-of-pocket expense legal liability can be less than that of a traditional health plan. That is because a qualified high-deductible health plan can cover 100% after the deductible, involving no coinsurance.

    Health savings accounts also give the flexibility not available in some traditional health plans to pay on a pretax basis for martin luther king jr library san jose ca medical expenses not covered in standard or HSA-eligible insurance plans, which may include dental, orthodontic, vision, and other approved expenses.[42][43]

    Health savings accounts also have an advantage over flexible spending accounts since deposits are not necessarily tied to expenses in a particular plan or calendar year. They are automatically rolled over for future medical expenses or may be used to reimburse qualified expenses from prior years as long as the expense was qualified under a health savings account plan at the time that the expense was incurred.[44]

    Over time, if medical expenses are low and contributions are made regularly to the health savings account, the account can accumulate significant assets that can be used for health care tax-free or used for retirement on a tax-deferred basis.

    The high-deductible health plan, when combined with a health savings account, is the only health insurance plan option available that can possibly have a net gain of value during the year if the funds are invested in the health savings account.

    A recent industry survey found that in July 2007 over 80% of health savings account plans provided first-dollar coverage for preventive care. It was true of virtually all health savings account plans offered by large employers and over 95% of the plans offered by small employers. It was also true of 59% of the plans that were purchased by individuals. In terms of Medicare, Plan F is considered a first-dollar coverage plan, as it has no out-of-pocket expenses on covered services.[45]

    All of the plans offered first-dollar preventive care benefits included annual physicals, immunizations, well-baby and well-child care, mammograms, and Pap tests; 90% included prostate cancer screenings, and 80% included colon cancer screenings.[46]

    They in fact encourage customers of all backgrounds to constrain costly spending and obtain more preventive health care. In Indiana, those with health savings accounts are 98% satisfied.[47]

    Criticism[edit]

    Some consumer organizations, such as Consumers Union[citation needed], and many medical organizations, such as the American Public Health Association, oppose health savings accounts because, in their opinion, they benefit only healthy, younger people, and make the health care system more expensive for everyone else. According to Stanford economist Victor Fuchs, "The main effect of putting more of it on the consumer is to reduce the social redistributive element of insurance."[48]

    Critics contend that low-income people, who are more likely to be uninsured, do not earn enough to benefit from the tax breaks offered by health savings accounts. These tax breaks are too modest, when compared to the actual cost of insurance, to persuade significant numbers to buy this coverage.[49]

    One industry study matched health savings account holders to the neighborhood income ("neighborhood" was defined as their census tract from the 2000 Census) and found that 3% of account holders lived in "low-income" neighborhoods (median incomes below $25,000 in 1999 dollars), 46% lived in lower-middle-income neighborhoods (median incomes between $25,000 and $50,000), 34% lived in middle-income neighborhoods (median incomes between $50,000 and $75,000), 12% lived in upper-income neighborhoods (median incomes between $75,000 and $100,000) and 5% lived in higher income neighborhoods (median incomes above $100,000).[50]

    In testimony before the US Senate Finance Committee's Subcommittee on Health in 2006, advocacy group Commonwealth Fund said that all evidence to date shows that health savings accounts and high-deductible health plans worsen, rather than improve, the US health system's problems.[51]

    Funds in a health savings account that are not held in savings accounts insured by the Federal Deposit Insurance Corporation are subject to market risk, as is any other investment. While the potential upside ecb balance sheet investment gains can be viewed as a benefit, the subsequent downside, as well as the possibility of capital loss, may make the health savings account a poor option for some.[52] And information about the maintenance fees, interest rates and investment lineups of health savings accounts is not easy to find.[53]

    Despite the criticism, assets in health savings accounts continue to grow, and providers are lowering fees.[54] In the first half of 2020 assets grew by approximately 12% according to an analysis by Morningstar.[55]

    Consumer satisfaction[edit]

    Consumer satisfaction results have been mixed. While a 2005 survey by the Blue Cross and Blue Shield Association found widespread satisfaction among health savings account customers,[56] a survey published in 2007 by employee benefits consultants Towers Perrin came to the opposite conclusion; it found that employees currently enrolled in such plans were significantly less satisfied with many elements of the health benefit plan compared to those enrolled in traditional health benefit plans.[57]

    In 2006, a Government Accountability Office report concluded: "HSA-eligible plan enrollees who participated in GAO's focus groups generally reported positive experiences, but most would not recommend the plans to all consumers. Few participants reported researching cost before obtaining health care services, although many researched the cost of prescription drugs. Most participants were satisfied with their HSA-eligible plans and would recommend them to healthy consumers, but not to those who use maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible."[58]

    According to the Commonwealth Fund, early experience with HSA-eligible high-deductible health plans reveals low satisfaction, high out-of-pocket costs, and cost-related access problems.[51] A survey conducted with the Employee Benefit Research Institute found that people enrolled hsa tax HSA-eligible high-deductible health plans were much less satisfied with many aspects of their health care than adults in more comprehensive plans.[59]

    • People in these plans allocate substantial amounts of income to their health care, especially those who have poorer health or lower incomes.
    • Adults in high-deductible health plans are far more likely to delay or avoid getting needed care, or to skip medications, because of the cost. Problems are particularly pronounced among those with poorer health or lower incomes.
    • Few Americans in any health plan have the information they need to make decisions. Just 12 to 16 percent of hsa tax adults have information from their health plan about the quality or cost of care provided by their doctors and hospitals.

    Some policy analysts say that consumer satisfaction doesn't reflect quality of health care. Researchers at RAND Corporation and Department of Veterans Affairs asked 236 vulnerable elderly patients at two managed care plans to rate their care, then examined care in medical records, as reported in Annals of Internal Medicine. There was no correlation. "Patient ratings of health care are easy to obtain and report, but do not accurately measure the technical quality of medical care," said John T. Chan, UCLA, lead author.[60][61][62]

    Health policy[edit]

    According to a 2006 Zogby poll, seven in ten voters back Congressional action to allow HSA participants to pay for their insurance premiums using money in their savings plans.[63]

    See also[edit]

    References[edit]

    1. ^ ab"Health Savings Accounts". Health401k.com. Retrieved 2010-12-09.
    2. ^"Health Savings Accounts (HSAs)". U.S. Treasury. Retrieved 2015-12-13.
    3. ^ ab26 CFR223
    4. ^"Affordable Care Act: Questions and Answers on Over-the-Counter Medicines and Drugs". IRS. September 3, 2010. Retrieved December 9, 2010.
    5. ^Christman, Michael D. (April 10, 2020). "COVID-19 and Benefits: 'Now, a Word from Your HR Director'". National Law Review.
    6. ^"Employer Health Benefits 2007 Annual Survey"(PDF). Kaiser Family Foundation. September 2007. Retrieved 2015-05-17.
    7. ^"Employer Health Benefits 2012 Annual Survey"(PDF). Kaiser Family Foundation. September 2012. Retrieved 2015-05-17.
    8. ^Hannah Yoo, January 2007 Census Shows 4.5 Million People Covered by HSA/High-Deductible Health Plans, AHIP, April 2007
    9. ^Hannah Yoo, January 2008 Census Shows 6.1 Million People Covered by HSA/High-deductible Health Plans, America's Health Insurance Plans, April 2008
    10. ^Press Release for Report Entitled "HSAs: Moving Beyond the Growing Pains,"Archived 2011-10-05 at the Wayback Machine Celent, January 7, 2008
    11. ^Hannah Yoo, January 2009 Census Shows 8 Million People Covered by HSA/High-deductible Health Plans, America's Health Insurance Plans, May 2009
    12. ^John E. Dicken, Director, Health Care, U.S. Government Accountability Office, "Health Savings Accounts: Participation Increased and Was More Common among Individuals with Higher Incomes," Letter to Henry A. Waxman, Chairman of the House of Representatives Committee on Oversight and Government Reform and Pete Stark, Chairman of House of Representatives Subcommittee on Health Committee on Ways and Means, dated April 1, 2008
    13. ^Center for Policy Research, America's Health Insurance Plans, http://www.ahip.org/HSA2012/
    14. ^J. P. Morgan Chase, http://www.jpmorgan.com/visit/hsasnapshot
    15. ^"Health Savings Accounts". Retrieved 2016-09-02.
    16. ^"HSA Assets Approach $100 Billion Through First Half of 2021". devenir.com. Devenir Research. Retrieved 2021-09-16.
    17. ^ ab"Publication 969 (2020), Health Savings Accounts and Other Tax-Favored Health Plans | Internal Revenue Service". www.irs.gov.
    18. ^"Publication 15: (Circular E), Employer's Tax Guide"(PDF). Internal Revenue Service. 2015. p. 16. Retrieved 2015-04-01.
    19. ^"HSA Center 2012 Limits". hsacenter.com. Retrieved 2011-11-02.
    20. ^"MMA Section 223 - Health Savings Accounts". congress.gov. Retrieved 2020-11-02.
    21. ^IRS Rev. Proc. 2018-30. Retrieved June 8, 2018
    22. ^ ab"IRS Rev. Proc. 2019-22". irs.gov. Retrieved 8 May 2020.
    23. ^ ab"IRS Rev. Proc. 2020-32"(PDF). irs.gov. Retrieved 2 Nov 2020.
    24. ^"The HSA Federal State Income Taxes - HSA for America". HSAforAmerica.com. Retrieved 2020-11-02.
    25. ^ abc"IRS Publication 969". www.irs.gov. Retrieved 2011-07-19.
    26. ^"IRS Rev. Proc. 2009-29"(PDF). irs.gov. Retrieved 17 August 2017.
    27. ^"IRS Rev. Proc. 2010-22"(PDF). irs.gov. Retrieved 17 August 2017.
    28. ^"IRS Rev. Proc. 2011-32"(PDF). irs.gov. Retrieved 17 August 2017.
    29. ^"IRS Rev. Proc. 2012-26"(PDF). irs.gov. Retrieved 17 August 2017.
    30. ^"IRS Rev. Proc. 2013-25"(PDF). irs.gov. Retrieved 17 August 2017.
    31. ^"IRS Rev. Proc. 2014-30"(PDF). irs.gov. Retrieved 17 August 2017.
    32. ^"IRS Rev. Proc. 2015-30"(PDF). irs.gov. Retrieved 17 August 2017.
    33. ^"IRS Rev. Proc. 2016-28"(PDF). irs.gov. Retrieved 17 August 2017.
    34. ^"IRS Rev. Proc. 2018-27"(PDF). irs.gov. Retrieved 8 May 2018.
    35. ^"IRS Rev. Proc. 2018-30"(PDF). irs.gov. Retrieved 8 June 2018.
    36. ^"Self Directed Accounts – HSA (Health Savings Account)". New Direction Trust Company. Retrieved 2020-04-15.
    37. ^"2006 IRS Publication 502". www.irs.gov. Retrieved 2007-10-21.
    38. ^"HSA.pdf"(PDF). treasury.gov. Archived from the original(PDF) on 2007-11-20. Retrieved 17 August 2017.
    39. ^"IRS outlines changes to health care spending available under CARES Act". www.irs.gov. Retrieved 2021-04-27.
    40. ^"Can I Roll HSA Contributions Into a Roth IRA?". Finance - Zacks.
    41. ^Ponce, Ernesto. "High-Deductible Health Plans Defined". coverageoneinsurance.com/.
    42. ^"US Department of the Treasury". treas.gov. Archived from the original on 2005-02-10. Retrieved 2015-04-07.
    43. ^"HSA Basics"(PDF). treas.gov. Archived from the original(PDF) on 2007-08-14. Retrieved 17 August 2017.
    44. ^"Internal Revenue Bulletin – Notice 2004-50". irs.gov. August 16, 2004. Retrieved 2015-04-07.
    45. ^"Compare Medigap Insurance Plans for 2021". MedicareFAQ. 2020-03-03. Retrieved 2020-10-02.
    46. ^Thomas Wilder and Hannah Yoo, "A Survey of Preventive Benefits in Health Savings Account (HSA) Plans, July 2007," America's Health Insurance Plans, November 2007
    47. ^Mitch Daniels (March 1, 2010). "Mitch Daniels: Hoosiers and Health Savings Accounts". WSJ. Retrieved 2015-04-07.
    48. ^Gladwell, Malcolm (August 29, 2005). "The Moral Hazard Myth". The New Yorker. Archived from the original on June 30, 2007. Retrieved 2007-06-28.
    49. ^"Health Care Coverage in America: Understanding the Issues and Proposed Solutions"(PDF). Alliance for Health Reform. Archived from the original(PDF) on 2007-10-25. Retrieved 2007-07-10.
    50. ^Hannah Yoo and Christelle Chen, Estimated Income Characteristics of HSA Accountholders in 2008, America's Health Insurance Plans, May 2009
    51. ^ ab"Health Savings Accounts and High-Deductible Health Plans: Why They Won't Cure What Ails U.S. Health Care". cmwf.org. Retrieved 2015-04-07.
    52. ^"Health Insurance Facts | Smarter Consumers of Healthcare". Health Harbor. Retrieved 2012-09-28.
    53. ^"Top HSA Providers of 2019: Our Annual Checkup". Morningstar, Inc. Retrieved 2020-08-18.
    54. ^October 16, Michael S. Fischer

      What Is the IRS Form 8889?

      Updated for Tax Year 2021 / October 16, 2021 07:45 AM


      OVERVIEW

      Before you can deduct your contributions to a health savings account (HSA), you must prepare IRS Form 8889.


      If you are the beneficiary of a health savings account (HSA), then the IRS requires you to prepare Form 8889 with your tax return before you can deduct your contributions to the account. The purpose of the form is to report your deductible contributions, calculate the deduction, report the distributions you take to pay medical expenses and to calculate the tax you must pay on withdrawals you make for non-medical related purposes.

      How an HSA works

      An HSA allows you to make annual tax-deductible contributions up to $3,600 for individual plans or up to $7,200 for family plans (as of 2021) to help pay out-of-pocket medical expenses in the future. If you are age 55 or older, you can make an additional $1,000 "catch-up" contribution, which is also tax-deductible.

      The money grows tax-deferred for as long as it’s held in the account, and all withdrawals you make to pay for qualified medical expenses are tax-free. This means you can pay for your medical expenses with tax-free dollars. However, this money is only tax-free if you file Form 8889 with your tax return.

      Qualifying for an HSA

      Not all taxpayers are eligible to have an HSA. To qualify, you must be enrolled in a health insurance plan that imposes high deductibles that meet or exceed IRS required amounts. In addition to high deductibles, the plan must impose maximum annual out-of-pocket cost ceilings that also satisfy IRS limitations.

      If you have other “first-dollar” medical coverage, enroll in Medicare or are claimed as a dependent on another taxpayer’s return, then you aren’t eligible to use an HSA. However, disability, dental plans, vision, long-term care and catastrophic-disease policies, such as cancer insurance, will not disqualify you from having an HSA.

      Using HSA funds

      You can use the money in your HSA for a variety of health-related expenses for yourself, your spouse or your dependents, including preventative care, surgery, and even orthodontics. However, you cannot use the money in an HSA to pay medical insurance premiums unless you are paying COBRA coverage after losing your job, or paying premiums while collecting unemployment.

      You are allowed to use the money to pay for long-term care insurance and, if enrolled in Medicare, to pay deductibles, co-pays and coinsurance. You must pay tax on any withdrawals you make for non-medical purposes plus an additional 10-percent penalty.

      Preparing Form 8889

      You must always file a Form 8889 in any year you or an employer contributes money to your HSA or you make withdrawals from the account. The deduction you calculate on Form 8889 is taken on the first page of your income tax return. Since this is an adjustment to your income, there is no requirement that you be eligible to itemize deductions to claim it.

      Remember, with TurboTax, we'll ask you simple questions about your life and hsa tax you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.


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      The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business hsa tax professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular national weather service ellicott city md for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

      Источник: https://turbotax.intuit.com/tax-tips/health-care/what-is-the-irs-form-8889/L8hRNHx4o

      *HSA contributions and earnings are not subject to federal taxes and not subject to state taxes in most states. A few states do not allow pretax treatment of contributions or earnings.

      **Plans vary, but this is how an HSA generally works.

      You cannot open an HSA if, in addition to coverage under an HSA-qualified High Deductible Health Plan ("HDHP"), you are also covered under a Health Flexible Spending Account (FSA) or an HRA or any other health coverage that is not a HDHP. Prior to enrollment with an HSA provider, you must certify that you have enrolled or plan to enroll under a HDHP and are not covered under any other health coverage that is not a HDHP. Please refer to your plan documents, including specific information on your HSA, or contact your employer for more information on what’s covered and not covered by the plan.

      The HSA provider and/or trustee/custodian is solely responsible for all HSA services, transactions, and activities. Cigna and your employer are not responsible for any aspects of the HSA services, administration, or operation.

      Источник: https://www.cigna.com/individuals-families/plans-services/plans-through-employer/account-based/hsa

      HSA Tax Center

      Q. Which forms do I need to file my taxes?

      A. There are three tax forms associated with health savings accounts (HSAs): IRS Form 1099-SA, 5498-SA and IRS Form 8889.

      Please use the information in your 1099-SA form, available online, to fill out IRS tax form 8889. Form 8889 is the only one you need to submit with your taxes. You can find IRS tax form 8889 in the “Statements & Docs” section after signing in to your account.

      • IRS form 1099-SA shows the amount of money you spent from your HSA during the tax year.
      • IRS form 5498-SA shows the amount of money deposited into your HSA for the tax year.
      • IRS form 8889 is the form you fill out and submit with your tax return.

      Q. When will I get my tax forms?

      A. IRS Form 1099-SA is typically available at the end of January. It will be posted to your account and mailed, if elected. IRS Form 8889 can be downloaded from IRS.gov at any time.

      IRS Form 5498-SA is typically available around the end of January. If you contribute in the new year for the previous tax year, you will also get another 5498-SA form in May.

      Qualcomm employees receive an investment report that reflects information for each investment the account holder has owned for the year to help assist with filing their taxes.  Optum Bank will mail the report in to all Qualcomm employees.

      Q. Why doesn’t my W-2 match the Form 5498-SA?

      A. If the contributions on your W-2 don’t match your Form 5498-SA, you likely made after-tax contributions or contributions between January 1 and tax day for the previous tax year.

      Q. What do I need to report to the IRS?

      A. In addition to the forms noted above, keep track of your spending in case you have to prove you used funds for qualified medical expenses. It’s up to you to keep track of your expenses and report any funds you use for nonqualified medical expenses.

      Источник: https://www.optumbank.com/qualcomm/tax-advantaged-accounts/health-savings-accounts/tax-center.html

      “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin, 1789



      But suntrust routing number ga this illustrious founding father the first to introduce this now commonly known concept? The Yale Book of Quotations shows that Christopher Bullock said in 1716, “Tis impossible to be sure of anything but Death and Taxes.” And only eight years later, Edward Ward stated that “Death and Taxes, they are certain.”

      Regardless of the origin, the fact that this sentiment still rings true hundreds of years later proves the perpetuation of the inevitable: the majority of taxes are unavoidable, even when it comes to the financial burden associated with our health itself.

      Fortunately, there are multiple options available for those seeking a tax-advantageous safety net of sorts — two of the most common are a Health Savings Account (HSA) or a Flexible Spending Account (FSA).

      Breaking it down: What is the difference between FSA and HSA?

      First, it’s important to note that both types of accounts serve to allocate pre-tax dollars to be set aside for specified purposes — including (but not limited to) medical, vision, and dental expenses you may incur throughout the term of your given plan.

      • HSAs are accounts you set up yourself. You can set up an account at your bank or credit union, for example. With this account, you can keep it no matter where you go or where you work (or if you work at all). You — and possibly your employer — contribute to the account throughout the year. The only stipulation is you must have a High Deductible Health Plan (HDHP) to have an HSA. Further, funds in an HSA can be rolled over each year, making it a smart choice if you plan on long-term savings.

      Once your HSA hsa tax set up, you can allocate additional money to the account with automatic deductions from your paycheck, and all funds contributed are tax deductible. An HSA is also a good consideration for those who wish to carry their plan and funds with them, even if they choose to pursue a career with a different employer.

      • Your employer owns your health FSA, and both you and your employer can fund it. One of the key benefits of an FSA is that funds can be utilized for childcare expenses in addition to products and services related to your health. This type of plan is, however, a use-it or lose-it arrangement. There is a rollover provision, though. Up to $500 of your unused FSA funds can be rolled over to the next year. If you contribute more throughout the year than you’re able to spend, you may find yourself scrambling to make doctor’s appointments in December to use up what you’ve put into your FSA.

      As is the case with an HSA, you can apply funds to your FSA from your gross pay, which means that what every dollar you put in is considered a tax-free contribution. In addition, you’re not likely to owe taxes on any withdrawals as long as you use the funds strictly for qualified expenses.

      Note: Self-employed filers are able to open an HSA but not an FSA.

      How do health accounts help save on your taxes?

      When you make qualified contributions to an HSA or health FSA, you can take a deduction for the amount of your contribution (or your contributions can reduce your taxable income on Form W-2). Either way, your income tax bill goes down.

      If your employer makes qualified contributions for you, the amount of their contributions is not taxable.

      Note: Health account contributions do not reduce your income tax subject to Social Security and Medicare tax.

      Why not take a tax deduction for medical expenses instead?

      Instead of setting up a health account, you could pay for your medical expenses with after-tax dollars and take a deduction. However, there’s one major problem old navy login visa that.

      You can only deduct medical expenses to the extent they exceed 7.5 percent of your adjusted gross income (AGI).

      There goes most or all of your deduction. If you qualify for a health account or other plan, it’s usually well worth the trouble to set it up and use it for any qualified medical expense needs that arise throughout the tax year.

      Contributing to an FSA or HSA can be a game changer.

      Even those with the most robust medical, vision, or dental insurance policies may still find themselves wondering what might happen if their health plan fails to cover an unexpected expense. Depending on your individual circumstances, an HSA or FSA may offer the peace of mind you seek for yourself and your family — as both a safety net in times of need and a welcome break for at least some of those unavoidable taxes.

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      Источник: https://blog.taxact.com/hsa-vs-fsa-how-does-your-health-plan-affect-your-taxes/

      Retirement Uses for Your Health Savings Account (HSA)

      You know a health savings account (HSA) helps pay for out-of-pocket medical costs, but it may surprise you to learn that this tax-advantaged account could be a superior retirement savings vehicle, too. Here is a look at what these accounts are, who can open one, and how to make the best use of an HSA for your retirement if you are fortunate enough to have one.

      Key Takeaways

      • Health savings accounts can be good tools for funding retirement years.
      • The high-deductible health plan you need to qualify for a health savings account (HSA) may be more budget-friendly than it seems because premiums are so low.
      • Unlike a flexible spending account, your HSA money is yours forever, and it's portable.
      • You can contribute to an HSA until you enroll in Medicare, even when you're not working.
      • Save, don't spend your HSA funds—and your investment strategy should be similar to the one you’re using for your other retirement savings accounts.

      What Is a Health Savings Account (HSA)?

      HSAs are tax-advantaged savings accounts designed to help people who have high-deductible health plans (HDHPs) pay for out-of-pocket medical expenses. While these accounts have been available since 2004, many eligible Americans are not taking advantage of them.

      These types of high-deductible health plans are offered by about 26% of employers who offer health benefits as of 2020. According to a March 2019 report from the Employee Benefit Research Institute (EBRI), anywhere from 21.8 million to 36.8 million people had HSA-eligible health insurance plans in 2018, but only 11%-22% of those individuals had actually opened an account.

      Moreover, people with HSAs had an average balance of just $3,221 in 2019—a pittance, considering that the allowable annual contribution in 2021 is $3,600 (rising to $3,650 in 2022) for those with individual health plans and $7,200 for those with family coverage (increasing to $7,300 in 2022).

      In addition, only 7% of HSAs were in investment accounts other than cash, as of 2019. EBRI found that virtually no one contributes the maximum, and nearly everyone takes current distributions to pay for medical expenses.

      All of this means that consumers who have HSAs—as well as consumers who are eligible for HSAs but haven’t opened one—are missing out on an incredible option for funding their later years. It’s time to start a new trend.

      Why Use an HSA for Retirement?

      An HSA's triple tax advantage, which is similar to that of a traditional 401(k) plan or IRA, makes it a top-notch way to save for retirement. HSAs are "the most tax-preferred account available," writes Michael Kitces, former director of financial planning at Pinnacle Advisory Group Inc. in Columbia, Md. "Using one to save for retirement medical expenses is a better strategy than using retirement accounts."

      Benefits of an HSA

      Your contributions to an HSA can be made via payroll deductions, as well as from your own funds. If the latter, they are tax-deductible, even if you don't itemize. If they're made from your own funds, they're considered to be made on a pre-tax basis, meaning they reduce your federal and state income tax liability—and they're not subject to FICA taxes, either.

      Your account balance grows tax-free. Any interest, dividends, or capital gains you earn are nontaxable.

      Any contributions your employer makes to your HSA do not have to be counted as part of your taxable income.

      Withdrawals for qualified medical expenses are tax-free. This is a key way in which an HSA is superior to a traditional 401(k) or IRA as a retirement vehicle. Once you begin to withdraw funds from those plans, you pay income tax on that money, regardless of how the funds are being used.

      Unlike a 401(k) or IRA, an HSA does not require the account holder to begin withdrawing funds at a certain age. The account can remain untouched as long as you like, although you are no longer allowed to contribute once you enroll in Medicare. You become eligible for Medicare at age 65.

      What's more, the balance can be carried over from year to year; you are not legally obligated to "use it or lose it," as with a flexible spending account (FSA). An HSA can move with you to a new job, too. You own the account, not your employer, which means the account is fully portable and goes when and where you do.

      Who Can Open an HSA?

      To qualify for an HSA, you must have a high-deductible health plan and no other health insurance. You must not yet qualify for Medicare, and you cannot be claimed as a dependent on someone else's tax return.

      A primary concern many consumers have about foregoing a preferred provider organization (PPO), health maintenance organization (HMO) plan, or other health insurance in favor of a high-deductible health plan is that they will not be able to afford their medical expenses.

      In 2021, the deductible for an HDHP is at least $1,400 for self-only coverage and $2,800 for family coverage (they remain the same in 2022). Depending on your coverage, your annual out-of-pocket expenses could run as highas $7,000 for individual coverage—or $14,000 for family coverage—under an HDHP (increasing to $7,050 and $14,100, respectively, in 2022). High expenses can be one reason these plans are more popular among affluent families who will benefit from the tax advantages and can afford the risk.

      However, a lower-deductible plan such as a PPO could have high costs because you’re paying the extra money regardless of the size of your medical expenses that year. With an HDHP, by contrast, you're spending more closely matches your actual healthcare needs.

      Of course, if you know your healthcare costs are likely to be high—a woman who is pregnant, for instance, or someone with a chronic medical condition—a health plan with a high deductible may not be the best choice for you. But keep in mind that HDHPs completely cover some preventive care services before you meet your deductible.

      All in all, an HDHP might be more budget-friendly than you think—especially when you consider its advantages for retirement. Let’s take a look at how you could be using the features of an HSA to more easily and more robustly fund your retirement.

      Max Out Contributions by Age 65

      As mentioned above, your HSA contributions are tax-deductible until you sign up for Medicare. The 2021 contribution limits of $3,600 (self-only coverage) and $7,200 (family coverage) include employer contributions. The contribution limits are adjusted annually for inflation.

      $7,300

      The contribution limit for a family health savings account in 2022. The contribution limit for a self-only (individual) HSA is $3,650.

      If you have an HSA and you're 55 or older, you can make an extra "catch-up" contribution of $1,000 per year and a spouse who is 55 or older can do the same, provided each of you has your own HSA account.

      You can contribute up to the maximum regardless of your income, and your entire contribution is tax-deductible. You can even contribute in years when you have no income. You can also contribute if pnc bank locations in virginia self-employed.

      "Maxing out contributions before age 65 allows you to save for general retirement expenses beyond medical expenses," says Mark Hebner, founder and president of Index Fund Advisors Inc. in Irvine, Calif., and author of Index Funds: The 12-Step Recovery Program for Active Investors.

      "Although you will not receive the tax exemption," Hebner adds, "it gives retirees more access to more resources to fund general living expenses."

      Don't Spend Your Contributions

      This may sound counterintuitive, but we're looking at an HSA primarily as an investment tool. Granted, the basic idea behind an HSA is to give people with a high-deductible health plan a tax break to make their out-of-pocket medical expenses more manageable.

      But that triple tax advantage means that the best way to use an HSA is to treat it as an investment tool that will improve your financial picture in retirement. And the best way to do that is to never spend your HSA contributions during your working years and pay cash out of pocket for your medical bills.

      In other words, think of your HSA contributions the same way you think of your contributions to any other retirement account: untouchable until you retire. Remember, the IRS does not require you to take distributions from your HSA in any year, before or during retirement.

      If you absolutely must spend some of your contributions before retirement, be sure to spend them on qualified medical expenses. These distributions are not taxable. If you are forced to spend the money on anything else before you’re 65, you will pay a 20% penalty and you will also pay income tax on those funds.

      Invest Your Contributions Wisely

      The key to maximizing your unspent contributions, of course, is to invest them wisely. Your investment strategy should be similar to the one you’re using for your other retirement assets, such as a 401(k) plan or an IRA. When deciding how to invest your HSA assets, make sure to consider your portfolio as a whole so your overall diversification strategy and risk profile are where you want them to be.

      Your employer might make it easy for you to open an HSA with a particular administrator, but the choice of where to put your money is yours. An HSA is not as hsa tax as a 401(k); it’s more like an IRA. Since some administrators only let you put your money in a savings account, where you’ll barely earn any interest, make sure to shop around for a plan with high-quality, low-cost investment options, such as Vanguard or Fidelity funds. 

      How Much Could You Receive?

      Let's do some simple math to see how handsomely this HSA savings and investment strategy can pay off. We’ll use something close to a best-case scenario and say that you’re currently 21, you make the maximum allowable contribution every year to a self-only plan, and you contribute every year until you’re 65. We’ll assume that you invest all your contributions, automatically reinvest all your returns in the stock market, earning an average annual return of 8%, and that your plan has no fees. By retirement, your HSA would have more than $1.2 million.

      What about a more conservative estimate? Suppose you’re now 40 years old and you only put in $100 per month until you’re 65, earning an average annual return of 3%. You’d still end up with nearly $45,000 by retirement. Try out an online HSA calculator to play with the numbers for your own situation.

      Maximize Your HSA Assets

      Here are some options for using your accumulated HSA contributions and investment returns in retirement. Remember, distributions for qualified medical expenses are not taxable, so you want to use the money exclusively for those expenses if possible. There are no required minimum distributions, so you can keep the money invested until you need it.

      If you do need to use the distributions for another purpose, they will be taxable. However, after age 65, you won’t owe the 20% penalty. Using HSA assets for purposes other than qualified medical expenses is generally less detrimental to your finances once you’ve reached retirement age because you may be in a lower tax bracket if you’ve stopped working, reduced your hours, or changed jobs.

      In this way, an HSA is effectively the same as a 401(k) or any other retirement account, with one key difference: There is no requirement to begin withdrawing the money at age 72. So you don’t have to worry about saving too much in your HSA and not being able to use it all effectively.

      Timing Is Everything

      By waiting as long as possible to spend your HSA assets, you maximize your potential investment returns and give yourself as much money as possible to work with. You’ll also want to consider market fluctuations when taking distributions, the same way you would when taking distributions from an investment account. You obviously want to avoid selling investments at a loss to pay for medical expenses.

      Choose a Beneficiary

      When you open your HSA, you will be asked to designate a beneficiary to whom any funds still in the account should go upon your death. If you're married, the best person to choose is your spouse because they can inherit the balance tax-free. (As with any investment with a beneficiary, however, you should revisit your designations from time to time because death, divorce, or other life changes may alter your choices.) 

      Anyone else you leave your HSA to will be subject to tax on the plan’s fair market value when they inherit it. Your 1st financial bank student credit card application administrator will have a designation-of-beneficiary form you can fill out to formalize your choice.

      Pay Health Expenses in Retirement

      Fidelity Investments’ most recent Retirement Health Care Cost survey calculates that the cost of healthcare throughout retirement for a couple who both turn 65 in 2021 is $300,000, up from $285,000 in 2019 and $295,000 in 2020. Funds captured in an HSA can help out with such skyrocketing costs.

      Qualified payments for which tax-free HSA withdrawals can be made include:

      • Office-visit copayments
      • Health insurance deductibles
      • Dental expenses
      • Vision care (eye exams and eyeglasses)
      • Prescription drugs and insulin
      • Medicare premiums
      • A portion of the premiums for a tax-qualified long-term care insurance policy
      • Hearing aids
      • Hospital and physical therapy bills
      • Wheelchairs and walkers
      • X-rays

      You can also use your HSA balance to pay for in-home nursing care, retirement community fees for lifetime care, long-term care services, nursing home fees, and meals and lodging that are necessary while obtaining medical care away from home. You can even use your HSA for modifications, such as ramps, grab bars, and handrails, that make your home easier to use as you age.

      One strategy might be to bunch qualified medical costs into a single year and tap the HSA for tax-free funds to pay them, compared with withdrawing from other retirement accounts that would trigger taxable income.

      “Using HSA money to pay for medical expenses and long-term care insurance in retirement is a great benefit for investors given the tax exemption on any withdrawals made to fund either," says Hebner. "In other words, it’s the most cost-effective way to fund those expenses because they provide investors the highest after-tax value." 

      Also, note that there are limitations on how much you can pay tax-free for long-term care insurance based on your age.

      Reimburse Yourself for Expenses

      With an HSA you are not required to take a distribution to reimburse yourself in the same year you incur a particular medical expense. The key limitation is that you can’t use an HSA balance to reimburse yourself for medical expenses you incurred before you established the account.

      So keep your receipts for all healthcare expenses you pay out of pocket after you establish your HSA. If in your later years, you find yourself with more money in your HSA than you know what to do with, you can use your HSA balance to reimburse yourself for those earlier expenses.

      Warnings About HSA Retirement Use

      The strategies described in this article are based on federal tax law. Most states follow federal tax law when it comes to HSAs, but yours may not. As of the 2020 tax year, California taxes HSA contributions. Even if you live in a state that taxes HSAs, however, you’ll still get the federal tax benefits.

      The taxation of these plans could change in the future at either the state or federal levels. The plans could even be eliminated altogether, but if that happens, we would likely see the existing account holders exempted, as was the case with Archer MSAs.

      The Bottom Line

      A health savings account, available to consumers who choose a high-deductible health plan, has been largely overlooked as an investment tool, but with its triple tax advantage, it provides an excellent way to save, invest, and take distributions without paying taxes.

      The next time you’re choosing a health insurance plan, take a closer look at whether a high-deductible health plan might work for you. If so, open an HSA and start contributing as soon as you’re eligible. By maximizing your contributions, investing them, and leaving the balance untouched until retirement, you’ll generate a significant addition to your other retirement options.

      Of course, you can't let the savings tail wag the medical dog. Hoarding your HSA monies rather than attending to your health is not recommended. However, if you’re financially able to use post-tax dollars for your current healthcare costs while hsa tax your pre-tax HSA dollars for later, you could build a nice nest egg for your use in retirement.

      Источник: https://www.investopedia.com/articles/personal-finance/091615/how-use-your-hsa-retirement.asp
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