Am I doing HSA wrong?

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RDHlooking4FIRE
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Am I doing HSA wrong?

Post by RDHlooking4FIRE » Tue Nov 07, 2017 2:50 pm

I put my after tax money in my HSA. Like out of my bank account. Are you supose to ask your employer to deduct pretaxed money from your paycheck? How do you do this?

I dont think my employer offers any match. I use hsa bank.

niceguy7376
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Re: Am I doing HSA wrong?

Post by niceguy7376 » Tue Nov 07, 2017 2:54 pm

Do you have HSA eligible High Deductible Health Ins plan ?
is that through your employer?
Do they contribute any amount to HSA?

If the first two are yes, then the employer should have the ability to deduct employee HSA contributions and then send that to the HSA account they asked you to setup at the company they recommended.

bloom2708
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Re: Am I doing HSA wrong?

Post by bloom2708 » Tue Nov 07, 2017 2:58 pm

I am in a similar camp. My company puts in $2,500.

I lump sum the other $4,250 with after tax dollars when I have the funds available. I could do a payroll deduction and spread them amount out evenly over 24 checks. I prefer to just get it done and max my 401k from my paycheck.

I believe I miss out on the FICA reduction and the upfront tax savings, but at tax time I would get the tax deduction after the fact. $2,500 is shown on my W-2 as being contributed by my employer.
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gtt561
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Re: Am I doing HSA wrong?

Post by gtt561 » Tue Nov 07, 2017 2:58 pm

I also have HSA Bank for my HSA through my employer. Yes, you want them to deduct pre-tax. You should be able to go to HR and have them set that up for you, that's what I did. HSA's do not match like a 401k. However, my employee does contribute to my HSA deductible which is nice. 2018 HSA contribution max limits went up from last year. Single is now $3450 and family is $6900.
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dsmil
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Re: Am I doing HSA wrong?

Post by dsmil » Tue Nov 07, 2017 3:24 pm

RDHlooking4FIRE wrote:
Tue Nov 07, 2017 2:50 pm
I put my after tax money in my HSA. Like out of my bank account. Are you supose to ask your employer to deduct pretaxed money from your paycheck? How do you do this?

I dont think my employer offers any match. I use hsa bank.
I do the same thing as you since my company doesn't offer a way to directly deduct it from my paycheck. When I began contributing to the HSA, I estimated what my tax benefit would be, and adjusted my paycheck witholdings so I could receive the tax break as a bump in my paycheck, rather than waiting until I file my taxes. You should certainly go through your employer if they offer it, to avoid the FICA, but there is no problem in doing what you do if that is not possible.

runner3081
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Re: Am I doing HSA wrong?

Post by runner3081 » Tue Nov 07, 2017 3:34 pm

bloom2708 wrote:
Tue Nov 07, 2017 2:58 pm
I believe I miss out on the FICA reduction and the upfront tax savings, but at tax time I would get the tax deduction after the fact. $2,500 is shown on my W-2 as being contributed by my employer.
Correct, you are missing on the triple-tax benefit of an HSA this way. You never get the full amount back you would have saved with payroll deductions - even on your tax return/calculation.

djheini
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Re: Am I doing HSA wrong?

Post by djheini » Tue Nov 07, 2017 3:50 pm

runner3081 wrote:
Tue Nov 07, 2017 3:34 pm
bloom2708 wrote:
Tue Nov 07, 2017 2:58 pm
I believe I miss out on the FICA reduction and the upfront tax savings, but at tax time I would get the tax deduction after the fact. $2,500 is shown on my W-2 as being contributed by my employer.
Correct, you are missing on the triple-tax benefit of an HSA this way. You never get the full amount back you would have saved with payroll deductions - even on your tax return/calculation.
This only applies if you don't hit the social security wage cap by the end of the year, correct?

bloom2708
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Re: Am I doing HSA wrong?

Post by bloom2708 » Tue Nov 07, 2017 3:53 pm

runner3081 wrote:
Tue Nov 07, 2017 3:34 pm
bloom2708 wrote:
Tue Nov 07, 2017 2:58 pm
I believe I miss out on the FICA reduction and the upfront tax savings, but at tax time I would get the tax deduction after the fact. $2,500 is shown on my W-2 as being contributed by my employer.
Correct, you are missing on the triple-tax benefit of an HSA this way. You never get the full amount back you would have saved with payroll deductions - even on your tax return/calculation.
By answering the HSA questions correctly I get a form 8889 (I think this is the one). This would give Fed tax credit for the portion I submitted post-tax. I know I am not getting FICA reductions.
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BL
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Re: Am I doing HSA wrong?

Post by BL » Tue Nov 07, 2017 3:57 pm

Not everyone should wish to lower FICA payments, as that decreases retirement payments for some, especially lower income folks.

From SSA:
PIA formula
For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2018, or who dies in 2018 before becoming eligible for benefits, his/her PIA will be the sum of:
(a) 90 percent of the first $896 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $896 and through $5,399, plus
(c) 15 percent of his/her average indexed monthly earnings over $5,399.
If you happen to be in the lower income category (pay is inflated over the years), you might be giving up some of that 90% payback, or even the 32% payback, in retirement. Possibly not too many of those on Bogleheads, but some work part-time for many years while doing care-giving to kids or parents. Others work full time for a lower income which may also be important in deciding the value of lowering future SS payments.

RDHlooking4FIRE
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Re: Am I doing HSA wrong?

Post by RDHlooking4FIRE » Tue Nov 07, 2017 5:04 pm

Just talked to HR they said they can not deduct from my check. He recommended increasing my exemptions? And taking it as write off at end of year. Is that a good option?

Easy Rhino
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Re: Am I doing HSA wrong?

Post by Easy Rhino » Tue Nov 07, 2017 5:52 pm

It's still a good idea to contribute to your HSA yourself to get the main federal tax break, even if it's not as optimal as having it it withheld to escape FICA tax.

RDHlooking4FIRE
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Joined: Tue Mar 14, 2017 11:27 am

Re: Am I doing HSA wrong?

Post by RDHlooking4FIRE » Tue Nov 07, 2017 6:02 pm

The hr guy said writing it off on your taxes is the same amount as if they did it pre tax? Is that correct? What benifit am i missing out on if i have to contribute after taxes?

Perkunas
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Re: Am I doing HSA wrong?

Post by Perkunas » Tue Nov 07, 2017 6:24 pm

RDHlooking4FIRE wrote:
Tue Nov 07, 2017 6:02 pm
The hr guy said writing it off on your taxes is the same amount as if they did it pre tax? Is that correct? What benifit am i missing out on if i have to contribute after taxes?
If it comes out of payroll, you avoid FICA taxes (7.65%) as well as avoiding income taxes as whatever you contribute does not go into your "wages" and therefore does not go into your AGI/taxable income calculation (which may save you on state income taxes, as well). In this case, since the contributions never went *into* your income, you will not see a deduction anywhere on the tax return.

If you contribute direct from your bank to your HSA, you are going to miss out on the FICA savings. In this case, at the end of the year, your gross income gets adjusted (reduced) by your contributions to the HSA. This is when you have your 8889 comes into play, and you should see an adjustment on the front-page of your tax return.

Thus, you get an income tax benefit in the year of contribution in both cases; everything else is the same aside from FICA.

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