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My latest HSA struggle


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So people over 55 are allowed $1000 catch-up, but only if they are single OR their spouse also has their own HSA. But my company apparently didn’t know that so let me take too much, so now it is a tax form quagmire of the first order to sort it all oot. They could not have made the HSA form much more obtuse. It makes the rest of taxes a walk in the park. Ok, so granted this is a first world problem because the excess comes from an employer contribution so free money anyhoo. But it just really pisses me off that the IRS comes up with this crap. 

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We did an HSA spend down to avoid a tax hit. Everyone got new glasses, fancy ones too and contacts.  Yeah we didn’t realize having too much of a balance could be a problem. 

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5 hours ago, Philander Seabury said:

So people over 55 are allowed $1000 catch-up, but only if they are single OR their spouse also has their own HSA. But my company apparently didn’t know that so let me take too much, so now it is a tax form quagmire of the first order to sort it all oot. They could not have made the HSA form much more obtuse. It makes the rest of taxes a walk in the park. Ok, so granted this is a first world problem because the excess comes from an employer contribution so free money anyhoo. But it just really pisses me off that the IRS comes up with this crap. 

In virtually every other high-income country, the government does your taxes for you, then you can do your own if you don't agree.  If government workers had to do it in the USA, the rules would be MUCH simpler.

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15 minutes ago, MickinMD said:

In virtually every other high-income country, the government does your taxes for you, then you can do your own if you don't agree.  If government workers had to do it in the USA, the rules would be MUCH simpler.

Ours are sort of the reverse. If the gubment disagrees, they will redo them. 

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I did it one time with kids orthodontics and decided just wasn’t worth it for the tax “savings”. It essentially was the double drawdown. While maintaining the contribution commitment, there was the billing for the orthodontics, paid with credit card or check then claim filed to reimburse the credit card or my checking account. Worse, this was before ‘cash back’ cards existed. Way too much work. Then add to that the calendar requirement to flatten the HSA.

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57 minutes ago, Tizeye said:

I did it one time with kids orthodontics and decided just wasn’t worth it for the tax “savings”. It essentially was the double drawdown. While maintaining the contribution commitment, there was the billing for the orthodontics, paid with credit card or check then claim filed to reimburse the credit card or my checking account. Worse, this was before ‘cash back’ cards existed. Way too much work. Then add to that the calendar requirement to flatten the HSA.

That sounds like the you are talking aboot the FSA, which was much worse. I hated trying to predict medical expenses because it was impossible. At least the HSA balance just carries over and doesn’t have that use it or lose it feature. 

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2 minutes ago, Philander Seabury said:

That sounds like the you are talking aboot the FSA, which was much worse. I hated trying to predict medical expenses because it was impossible. At least the HSA balance just carries over and doesn’t have that use it or lose it feature. 

Probably. It would have been in the early 1990's and the experience was such that didn't want to have anything to do with it, irrespective what it was called.

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I emptied my HSA for my surgery...my trainer sessions also come out of my HSA...but probably not the next set I purchase..been going weekly until the surgery..pretty  spendy..but :dontknow: I am worth it :P...less to leave in my will.

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I don't have either, but I wish I had an HSA and had started younger in life.  As others have mentioned, the FSA was an older version and was hard to manage.  You had a "use it or lose it" requirement each year.

An HSA doesn't expire, you can roll it over for years.

Many people use HSA's as another tax preferred retirement account.  The downside is you have to have a plan that  qualifies as a "high deductible plan" which means you'll have to pay a significant amount before the insurance kicks in.  The plus side is that a lot of companies want to encourage these plans, so they'll often deposit amounts in the account or match deposits).  If you don't need to spend the HSA (either because you don't have any expenses or you can pay them from other funds), the HSA can grow tax free for years..  You can also invest your money in mutual funds if  you want to take some market risk with it.

It's a rare "triple tax free" account - money goes in pre-tax, grows tax free and can be withdrawn without tax to pay medical expenses.  You don't even pay social security taxes on the contribution.  .

Quote

You’ll face a stiff penalty (20%, plus income taxes) if you tap your HSA for non-medical expenses before age 65. But after age 65, you’ll only have to pay taxes on the withdrawal if you use it for anything other than eligible medical expenses. Your best bet, though, is to use the money for medical expenses. You can use HSA funds to pay for medical costs that Medicare doesn’t cover, as well as monthly premiums for Medicare Part B and Part D and Medicare Advantage plans. Withdrawals for those costs will be tax- and penalty-free.

I have also read, but can't confirm, that if you have paid medical expenses over the years and save the receipts, you can withrdraw money from the account even years later to "reimburse" yourself.

https://www.kiplinger.com/article/saving/t027-c000-s002-tapping-the-power-of-a-health-savings-account.html

https://www.cnbc.com/2019/09/18/this-triple-tax-advantaged-account-might-beat-your-401k-plan.html

 

 

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10 hours ago, Philander Seabury said:

So people over 55 are allowed $1000 catch-up, but only if they are single OR their spouse also has their own HSA. But my company apparently didn’t know that so let me take too much, so now it is a tax form quagmire of the first order to sort it all oot. They could not have made the HSA form much more obtuse. It makes the rest of taxes a walk in the park. Ok, so granted this is a first world problem because the excess comes from an employer contribution so free money anyhoo. But it just really pisses me off that the IRS comes up with this crap. 

You're just not rich enough to avoid it.

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