Kozmig wrote:I plan on paying cash for medical expenses leaving the HSA for future years if possible.
Does this make sense?
Your choice: get the tax deduction on $5,450 HSA contribution (federal income tax, state income tax, payroll taxes) and spend post-tax cash on $3,500 of medical expenses. If you are in the 25% bracket, in the child tax credit phaseout, and have an 8% state tax and you itemize, $3,500 of post-tax money requires about $5,500 of gross income.
Alternative: get the tax deduction on $5,450 HSA contribution, spend $3,500 on medical expenses, and have $2,000 left over, and contribute $5,500 to a deductible spousal TIRA. To be eligible for the spousal TIRA your gross income needs to be under about $205,000.
Your choice is yielding $5,450 of tax-deferred savings, while the alternative would yield $7,500 at no extra cost to you. What am I missing? I'm not familiar with HSA's, so maybe I'm missing something key. I do understand that HSA withdrawals could be tax-free, while TIRA withdrawals aren't necessarily so, but in the event of a major medical expense, TIRA withdrawals can be tax- and penalty-free for expenses above 10% of AGI.
wiki wrote:If you are maxing out your retirement accounts, you should treat the HSA as an opportunity for further savings, like an IRA, and not withdraw from it until you retire.
but you're not maxing out your retirement accounts.