TAX EXPERTS?? Medical bills question??

[riptides]

We are in the same boat, our Daughter had two ankle surgeries this year and I had some medical expenses as well - in total about 12,000 out of pocket. But we combined made about 200,000 last year so we are out of luck. Our CPA did tell us to put the maximum into our HSA and then write a check back to ourselves for that amount and we could get that deduction.

I think those HSA type accounts can only be used for the year the service was rendered.

Out of pocket expenses are crazy in my family. Every year (+20 now) there has been an uptick in my expenses. So much in fact, that in 2012 I actually managed to deduct them. Now mind you my salary went up too over the decades. Something quite not right with the picture.

 

[randy41]

you can payout at any time for a qualifying medical expense. the deduction on your taxes is triggered by the contribution to the plan. you can contribute for 2013 up until the due date of the return (4/15) and use that as a deduction on your taxes in 2013. if your plan is through your employer then its already untaxed and paid for and there's no deduction. its best through your employer then its not subject to employment taxes(fica/medicare). it is an above the line deduction if you make the contributions yourself. you can invest in pretty much anything you can invest an IRA in. the investment income is tax free if it is used for a qualifying medical expense.

 

[aczlan]

I think those HSA type accounts can only be used for the year the service was rendered.
Out of pocket expenses are crazy in my family. Every year (+20 now) there has been an uptick in my expenses. So much in fact, that in 2012 I actually managed to deduct them. Now mind you my salary went up too over the decades. Something quite not right with the picture.

I don't think that is the case with a HSA. A Flexible Spending Account (FSA) is only good for that year, so that may be the case with one of those, but a HSA is essentially a bank account with your name on it holding pre-tax money that can only be spent for medical expenses.

Aaron Z

 

[riptides]

I don't think that is the case with a HSA. A Flexible Spending Account (FSA) is only good for that year, so that may be the case with one of those, but a HSA is essentially a bank account with your name on it holding pre-tax money that can only be spent for medical expenses.

Aaron Z

Yes, you and randy41 are correct. This year I pulled from both, and lost the distinction of what was what.

 

[LD1]

My only concern would be if I pay all my med bills this Jan or Feb, but games me til Nov or DEC to get to the max I can put in, is it going to.be a hastle trying to reimburse myself for things from 6 months prior?

And what is the timeline for reimbursing myself? If the max I can put in is 6k, and if I have 12k of bills, can I do that next year also??

And if not, i might re-think the loan thing, if they can do 0%. Set it up so I can pay the max each year out of the HSA til its paid off.

It also seems odd that you can pay medical bills tax free from an HSA, but can deduct them at the end of the year unless you go over 10%agi and itemize??

I definatally need to do some more research.

 

[aczlan]

My only concern would be if I pay all my med bills this Jan or Feb, but games me til Nov or DEC to get to the max I can put in, is it going to.be a hastle trying to reimburse myself for things from 6 months prior?
And what is the timeline for reimbursing myself? If the max I can put in is 6k, and if I have 12k of bills, can I do that next year also??
And if not, i might re-think the loan thing, if they can do 0%. Set it up so I can pay the max each year out of the HSA til its paid off.
It also seems odd that you can pay medical bills tax free from an HSA, but can deduct them at the end of the year unless you go over 10%agi and itemize??
I definatally need to do some more research.

IIRC, if you paid the bills from a HSA filled with pretax money they aren't deductible.
As for reimbursing yourself, its just a withdrawal from a bank account, but if the IRS audits you, you had better have receipts to back up your withdrawals or you get hit with normal income tax AND a 20% penalty.
As for the timeline, someone who is better versed in tax law than me would have to speak to the tax implications of paying for 2013 medical bills with money contributed to a HSA in 2014...

Aaron Z

 

[LD1]

I understand med bills paid with per tax HSA isn't deductible. But that's the point, its already pre tax. The idea in my head ( and I may be way off), is to NOT have to pay income tax on med bills. 15% tax on 10k worth of bills is 1500 saved if I can pay it with pretax HSA???

As far as paying 2013 bills with money contributed in 2014...well we haven't even gotten all of the bills yet. And since HSA money rolls over, how is it different than paying 2014 bills with money put in from 2013 or 2012?

I certainly need more research/advise. But if it is possible to not have to pay taxes on money going towards these med bills, whether all or some of them, I need to find out how to utilize it.

 

[aczlan]

I understand med bills paid with per tax HSA isn't deductible. But that's the point, its already pre tax. The idea in my head ( and I may be way off), is to NOT have to pay income tax on med bills. 15% tax on 10k worth of bills is 1500 saved if I can pay it with pretax HSA???

Yes, just remember that you can only pay $x per year (~$6k/family IIRC) into a HSA.

As far as paying 2013 bills with money contributed in 2014...well we haven't even gotten all of the bills yet. And since HSA money rolls over, how is it different than paying 2014 bills with money put in from 2013 or 2012?

Sorry for the confusion, I meant paying bills billed in 2013 with money contributed in 2014. I think it should be fine, but I don't know for sure.

I certainly need more research/advise. But if it is possible to not have to pay taxes on money going towards these med bills, whether all or some of them, I need to find out how to utilize it.

Less money spent on taxes is more better in my book...

Aaron Z

 

[LD1]

Tough to do anything at work today. But I need to make some calls tonight. I was reading through some IRS forms online, and it is reading like the distributions from HSA accounts are taxable as income at year end?? And I seem to remember vaguely in years past something about that on my returns. And if that is the case what's the point??

 

[SPYDERLK]

Tough to do anything at work today. But I need to make some calls tonight. I was reading through some IRS forms online, and it is reading like the distributions from HSA accounts are taxable as income at year end?? And I seem to remember vaguely in years past something about that on my returns. And if that is the case what's the point??

Yeah ... thats where Im at. Alledgedly the employer contributions are pre tax and gain interest tax free. ... so you may have to pay tax on principle and intererst maybe. But what about when you supplement up to the max contribution. Thats after tax money. There, I would think only interest would be taxable. :confused2:
larry