Re: how to deduct medical copays and other medical expenses

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Subject Author Date Re: how to deduct medical copays and other medical expenses John Levine 09-01-2009  Re: how to deduct medical copays and other medical... Alan 09-01-2009  Re: how to deduct medical copays and other medical... D. Stussy 09-01-2009  Re: how to deduct medical copays and other medical... Mark Bole 09-04-2009   Re: how to deduct medical copays and other medica... Steve Pope 09-04-2009
Posted by John Levine on September 1, 2009, 10:02 am Please log in for more thread options >i have a high deductible insurance plan bc i have my own company, >however, it's not HSA compatible. The rules for HSA compatibility are not very arcane. My suggestion would be to go back to your insurance agent, switch to an HSA compatible plan, and set up an HSA. Then you pay your out of pocket costs from the HSA and they're all deductible. R's, John -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Alan on September 1, 2009, 12:10 pm Please log in for more thread options John Levine wrote: >> i have a high deductible insurance plan bc i have my own company, >> however, it's not HSA compatible. > > The rules for HSA compatibility are not very arcane. My suggestion > would be to go back to your insurance agent, switch to an HSA > compatible plan, and set up an HSA. Then you pay your out of pocket > costs from the HSA and they're all deductible. > > R's, > John > You have it backwards. If you set up an HSA, your contributions to the HSA are tax deductible above the line. Distributions are tax-free if used to pay for medical. There is no tax deduction for paying the medical with tax-free funds. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by D. Stussy on September 1, 2009, 8:46 pm Please log in for more thread options > John Levine wrote: > >> i have a high deductible insurance plan bc i have my own company, > >> however, it's not HSA compatible. > > > > The rules for HSA compatibility are not very arcane. My suggestion > > would be to go back to your insurance agent, switch to an HSA > > compatible plan, and set up an HSA. Then you pay your out of pocket > > costs from the HSA and they're all deductible. > > You have it backwards. If you set up an HSA, your contributions > to the HSA are tax deductible above the line. Distributions are > tax-free if used to pay for medical. There is no tax deduction > for paying the medical with tax-free funds. I concur in that I don't like the way Mr. Levine stated it. The funds are deductible going IN to the HSA. When paying (or reimbursing) medical expenses, the money is not recognized at all for tax purposes. However, expenses covered by the HSA don't qualify for the normal itemized medical deduction. For reimbursment of a prior year expense, that may mean amending the prior year return if a deduction was taken and yielded a tax benefit. Reimbursement can occur only for expenses incurred on or after the first of the month in which the HSA was created (or for HSAs created before April 15, 2005, expenses on or after January 1, 2004). There's a special rule for when HSAs can be used to pay health insurance premiums, but all other medical expenses, including transportation, qualify at all times. Note that if anyone has clients that have not paid all their medical expenses with their HSA (i.e., they have medical expenses that were NOT paid from the HSA and not deducted on Schedule A), you should be TRACKING this - as when they die, the estate can still take a reimbursement distribution which will remain tax free (along with payment of medical expenses up to 1 year from the date of death), while the inherited portion will become income to any non-spouse beneficiary. Cf. Form 8889, Line 15. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Mark Bole on September 4, 2009, 11:55 am Please log in for more thread options Alan wrote: > John Levine wrote: >>> i have a high deductible insurance plan bc i have my own company, >>> however, it's not HSA compatible. > You have it backwards. If you set up an HSA, your contributions to the > HSA are tax deductible above the line. Distributions are tax-free if > used to pay for medical. There is no tax deduction for paying the > medical with tax-free funds. And as a reminder, not all states conform to federal HSA treatment, for example in California an HSA account is just a regular investment account for purposes of state income tax -- no deduction for contributions, earnings are taxable, and withdrawals have no tax impact whatsoever. -Mark Bole -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Steve Pope on September 4, 2009, 12:57 pm Please log in for more thread options >And as a reminder, not all states conform to federal HSA treatment, for >example in California an HSA account is just a regular investment >account for purposes of state income tax -- no deduction for >contributions, earnings are taxable, and withdrawals have no tax impact >whatsoever. Acutally you do get a California Adjustment to your schedule A to (possibly) deduct the medical expenses paid from an HSA. >From 2008 Schedule CA instructions, page 7: "Health Savings Account (HSA) Distributions . If you received a tax-free HSA distribution for qualified medical expenses, enter the qualified expenses paid that exceed 7.5% of federal AGI as an adjustment to itemized deductions." Steve -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted Are medical insurance monthly payments deductible on Schedule A medical expenses? December 26, 2007, 9:01 pm Consulting assistance on medical bills as a medical deduction? October 6, 2007, 10:27 pm Medical expenses February 13, 2007, 5:41 pm MFS medical expenses April 2, 2007, 6:17 pm Car: Medical Expenses January 10, 2008, 9:07 am Medical Expenses January 9, 2009, 10:27 am Deductibility of Medical Expenses June 4, 2009, 2:54 pm HSA & Deducting Medical Expenses. 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