Should I use my taxable account to pay for medical expenses while contributing more to HSA?

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doss
Posts: 194
Joined: Tue Nov 01, 2011 9:52 am

Should I use my taxable account to pay for medical expenses while contributing more to HSA?

Post by doss » Fri Oct 05, 2018 11:14 am

Hi all,
My employer just made available an HSA and they will contribute $$ to it. I am not sure how much they will contribute but I do see a lump sum of $1,500 so far (I think that's it for the year?). I set up my paycheck deduction to about $115/biweekly.

With that said, I am hoping to get some advice about what I should do next. Should I use funds from my taxable brokerage account (Vanguard VTSAX Total Stock Marker Admiral Shares) to pay for medical expenses here on out? This would allow me to deduct more from my paycheck to my HSA and reduce my taxable income.

Just wanted to be sure I understand the basics here first before making any moves. Thanks!

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unclescrooge
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Re: Should I use my taxable account to pay for medical expenses while contributing more to HSA?

Post by unclescrooge » Fri Oct 05, 2018 11:17 am

doss wrote:
Fri Oct 05, 2018 11:14 am
Hi all,
My employer just made available an HSA and they will contribute $$ to it. I am not sure how much they will contribute but I do see a lump sum of $1,500 so far (I think that's it for the year?). I set up my paycheck deduction to about $115/biweekly.

With that said, I am hoping to get some advice about what I should do next. Should I use funds from my taxable brokerage account (Vanguard VTSAX Total Stock Marker Admiral Shares) to pay for medical expenses here on out? This would allow me to deduct more from my paycheck to my HSA and reduce my taxable income.

Just wanted to be sure I understand the basics here first before making any moves. Thanks!
Max out your hsa contribution. You can either pay medical expenses out of pocket, or from your HSA.

If you can pay out of pocket, your HSA can grow tax free, making it an additional retirement plan.
Last edited by unclescrooge on Fri Oct 05, 2018 11:19 am, edited 1 time in total.

WhiteMaxima
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Re: Should I use my taxable account to pay for medical expenses while contributing more to HSA?

Post by WhiteMaxima » Fri Oct 05, 2018 11:18 am

Use your reward card to pay for medical bill. get 2-3% cash back. Save the receipt. When you need a big purchase (car, house down pay), submit receipt to HSA to get your much needed lump sum cash. If projected return of equity is holding forever at 7%, I would leave HSA untouched tax free till later years.

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grabiner
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Re: Should I use my taxable account to pay for medical expenses while contributing more to HSA?

Post by grabiner » Sun Oct 07, 2018 9:39 am

You should always max out your HSA. If you need to sell something in your taxable account, do that, because the HSA has much more favorable tax treatment; contributions are tax-deductible, and withdrawals are tax-free if used for medical expenses.

Since you have a taxable account, it is better to pay for medical expenses out of pocket, as long as you don't have to sell anything for a capital gain. By paying from your taxable account, you increase the amount of tax-deferred space you can use.
Wiki David Grabiner

aristotelian
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Re: Should I use my taxable account to pay for medical expenses while contributing more to HSA?

Post by aristotelian » Sun Oct 07, 2018 10:11 am

I would rather have $3450 growing tax free than $3450 subject to tax on the gains.

doss
Posts: 194
Joined: Tue Nov 01, 2011 9:52 am

Re: Should I use my taxable account to pay for medical expenses while contributing more to HSA?

Post by doss » Wed Oct 10, 2018 10:36 am

Thanks everyone.

I am going to use my taxable brokerage account to pay for medical expenses (but will use points or cash back credit card to make the actual payments) while at the same time trying to max out my HSA contributions. Then, if I need some extra $$ to put towards a large downpayment of some sort, I will reimburse some medical expenses using my HSA and use that money towards the downpayment. I will try to treat the HSA as a retirement vehicle as much as possible.

Let me know if I have this correct!

Thanks again!

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