Two HSA Questions

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mjedwards409
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Joined: Sat Mar 30, 2019 5:30 pm

Two HSA Questions

Post by mjedwards409 » Sun Oct 20, 2019 6:46 am

I have previously not taken full advantage of HSAs. (I'm contributing a few hundred $'s this year) Open enrollment is here for 2020, and I'm going to max it out for next year. I am married filing jointly, so that will be an extra $7K tax protected added to maxing out my 401K, my Roth IRA, and my wife's Roth IRA. I opened a taxable account this year but will prioritize the HSA over taxable next year.

I have two quick questions about HSAs:

1) I've done some research and see I can make contributions in 2019 even though it's not being deducted from my paycheck to try to catch up to the 2019 limit. However, I'm going to hit the standard deduction for MFJ in 2019 even with maxing out the HSA, so should I just hold off on that? It seems like I'm losing a big part of my tax benefit since it would decrease my taxable income for 2019. I have other things I can do with that $7K like pay off half of my car loan or invest it in my taxable account. I'm hesitant to tie that $7K up until after 65 or only medical if I've already missed out on the up front tax benefit.

2) When I start maxing out my HSA, I'll start collecting and saving all of my medical expenses so I can get reimbursed later. Do I have to save the bills as well as proof of payment for everything? If so, going back over the past 10 years to track down proof of payment is going to be a real pain, and wondering if I just make sure to be diligent going forward.

Thanks for any feedback!

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RickBoglehead
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Re: Two HSA Questions

Post by RickBoglehead » Sun Oct 20, 2019 7:01 am

When was the HSA established? That's the first medical bill that can be paid for. You don't get to go back a day prior, much less 10 years.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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mjedwards409
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Re: Two HSA Questions

Post by mjedwards409 » Sun Oct 20, 2019 7:06 am

RickBoglehead wrote:
Sun Oct 20, 2019 7:01 am
When was the HSA established? That's the first medical bill that can be paid for. You don't get to go back a day prior, much less 10 years.
Oh understood. It was established 5 years ago. Just been putting a few hundred in there each year. So same questions as above except 5 years instead of 10. :happy

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RickBoglehead
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Re: Two HSA Questions

Post by RickBoglehead » Sun Oct 20, 2019 7:13 am

mjedwards409 wrote:
Sun Oct 20, 2019 7:06 am
RickBoglehead wrote:
Sun Oct 20, 2019 7:01 am
When was the HSA established? That's the first medical bill that can be paid for. You don't get to go back a day prior, much less 10 years.
Oh understood. It was established 5 years ago. Just been putting a few hundred in there each year. So same questions as above except 5 years instead of 10. :happy
You would need proof of expense and proof of payment, yes. Of course, no one asks for this, but the IRS could.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

Tdubs
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Re: Two HSA Questions

Post by Tdubs » Sun Oct 20, 2019 7:17 am

mjedwards409 wrote:
Sun Oct 20, 2019 6:46 am
I have previously not taken full advantage of HSAs. (I'm contributing a few hundred $'s this year) Open enrollment is here for 2020, and I'm going to max it out for next year. I am married filing jointly, so that will be an extra $7K tax protected added to maxing out my 401K, my Roth IRA, and my wife's Roth IRA. I opened a taxable account this year but will prioritize the HSA over taxable next year.

I have two quick questions about HSAs:

1) I've done some research and see I can make contributions in 2019 even though it's not being deducted from my paycheck to try to catch up to the 2019 limit. However, I'm going to hit the standard deduction for MFJ in 2019 even with maxing out the HSA, so should I just hold off on that? It seems like I'm losing a big part of my tax benefit since it would decrease my taxable income for 2019. I have other things I can do with that $7K like pay off half of my car loan or invest it in my taxable account. I'm hesitant to tie that $7K up until after 65 or only medical if I've already missed out on the up front tax benefit.

2) When I start maxing out my HSA, I'll start collecting and saving all of my medical expenses so I can get reimbursed later. Do I have to save the bills as well as proof of payment for everything? If so, going back over the past 10 years to track down proof of payment is going to be a real pain, and wondering if I just make sure to be diligent going forward.

Thanks for any feedback!
You don't mention your age, but I wouldn't sweat the lost decade of bills. It sounds like you didn't contribute much annually anyway, and you will probably have lots of expenses going forward and into retirement that can be retroactively applied to that money.

I've seen it suggested that you ask your main providers with a summary invoice of your annual account with them showing bills and payments. This is my first year with an HSA, but I'm going to try that. I'm stunned at how thick is my folder of qualified expenses. I need a better system. I can't imagine leaving that mess behind if I passed away.

willyd123
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Re: Two HSA Questions

Post by willyd123 » Sun Oct 20, 2019 7:27 am

Hello -

I'm not sure I understand your first question. Contributing to an HSA will reduce your taxable income regardless of whether you have enough deductions to eclipse the standard deduction amount. HSA contributions are not itemized deductions. HSA contributions are deductions from income like 401(k) contributions and reduce your taxable income. Maybe I don't understand what you are asking.

Any qualified expenses if incurred AFTER you have opened an HSA is reimbursable from your HSA. However, if you can do it, a better strategy is to put as much as you can into the HSA, invest the assets and don't use the funds until you are Medicare-eligible.

lakpr
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Re: Two HSA Questions

Post by lakpr » Sun Oct 20, 2019 7:30 am

If you were with the same health insurance company all five years, and you have online access, you can download the Explanation of Benefits pages that show patient responsibility.

You could also go to the pharmacy where you filled out the prescriptions, and ask for yearly statements. Walgreens does this for free for us.

You may not be able to get all 5 years worth of statements, but at least two years you shoukd be able to.

Edited to add: if you add money to the HSA outside of payroll, you are still paying the payroll taxes which had you paid via pay checks you could have avoided. That said, if your income is more than $128k, you are going to pay the max SS taxes anyway, so the question of SS tax avoidance is moot.
Last edited by lakpr on Sun Oct 20, 2019 7:35 am, edited 2 times in total.

Topic Author
mjedwards409
Posts: 22
Joined: Sat Mar 30, 2019 5:30 pm

Re: Two HSA Questions

Post by mjedwards409 » Sun Oct 20, 2019 7:35 am

Tdubs wrote:
Sun Oct 20, 2019 7:17 am
mjedwards409 wrote:
Sun Oct 20, 2019 6:46 am
I have previously not taken full advantage of HSAs. (I'm contributing a few hundred $'s this year) Open enrollment is here for 2020, and I'm going to max it out for next year. I am married filing jointly, so that will be an extra $7K tax protected added to maxing out my 401K, my Roth IRA, and my wife's Roth IRA. I opened a taxable account this year but will prioritize the HSA over taxable next year.

I have two quick questions about HSAs:

1) I've done some research and see I can make contributions in 2019 even though it's not being deducted from my paycheck to try to catch up to the 2019 limit. However, I'm going to hit the standard deduction for MFJ in 2019 even with maxing out the HSA, so should I just hold off on that? It seems like I'm losing a big part of my tax benefit since it would decrease my taxable income for 2019. I have other things I can do with that $7K like pay off half of my car loan or invest it in my taxable account. I'm hesitant to tie that $7K up until after 65 or only medical if I've already missed out on the up front tax benefit.

2) When I start maxing out my HSA, I'll start collecting and saving all of my medical expenses so I can get reimbursed later. Do I have to save the bills as well as proof of payment for everything? If so, going back over the past 10 years to track down proof of payment is going to be a real pain, and wondering if I just make sure to be diligent going forward.

Thanks for any feedback!
You don't mention your age, but I wouldn't sweat the lost decade of bills. It sounds like you didn't contribute much annually anyway, and you will probably have lots of expenses going forward and into retirement that can be retroactively applied to that money.

I've seen it suggested that you ask your main providers with a summary invoice of your annual account with them showing bills and payments. This is my first year with an HSA, but I'm going to try that. I'm stunned at how thick is my folder of qualified expenses. I need a better system. I can't imagine leaving that mess behind if I passed away.
Thank you. i’m 33. Wife is 29.

Topic Author
mjedwards409
Posts: 22
Joined: Sat Mar 30, 2019 5:30 pm

Re: Two HSA Questions

Post by mjedwards409 » Sun Oct 20, 2019 7:38 am

willyd123 wrote:
Sun Oct 20, 2019 7:27 am
Hello -

I'm not sure I understand your first question. Contributing to an HSA will reduce your taxable income regardless of whether you have enough deductions to eclipse the standard deduction amount. HSA contributions are not itemized deductions. HSA contributions are deductions from income like 401(k) contributions and reduce your taxable income. Maybe I don't understand what you are asking.
Thanks. Basically it’s too late for me to set it up coming from my paycheck in 2019 so if I contribute now it’s with post tax money. Can I still lower my AGI on my tax return by $7k even if I’m using the standard deduction? I usually do my own taxes with H&R block software since my situation is very straight forward but don’t remember a section about that.

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RickBoglehead
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Re: Two HSA Questions

Post by RickBoglehead » Sun Oct 20, 2019 7:44 am

mjedwards409 wrote:
Sun Oct 20, 2019 7:38 am
willyd123 wrote:
Sun Oct 20, 2019 7:27 am
Hello -

I'm not sure I understand your first question. Contributing to an HSA will reduce your taxable income regardless of whether you have enough deductions to eclipse the standard deduction amount. HSA contributions are not itemized deductions. HSA contributions are deductions from income like 401(k) contributions and reduce your taxable income. Maybe I don't understand what you are asking.
Thanks. Basically it’s too late for me to set it up coming from my paycheck in 2019 so if I contribute now it’s with post tax money. Can I still lower my AGI on my tax return by $7k even if I’m using the standard deduction? I usually do my own taxes with H&R block software since my situation is very straight forward but don’t remember a section about that.
Yes. Open your 2018 software and out it in and see.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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Tamarind
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Re: Two HSA Questions

Post by Tamarind » Sun Oct 20, 2019 7:51 am

mjedwards409 wrote:
Sun Oct 20, 2019 7:38 am
willyd123 wrote:
Sun Oct 20, 2019 7:27 am
Hello -

I'm not sure I understand your first question. Contributing to an HSA will reduce your taxable income regardless of whether you have enough deductions to eclipse the standard deduction amount. HSA contributions are not itemized deductions. HSA contributions are deductions from income like 401(k) contributions and reduce your taxable income. Maybe I don't understand what you are asking.
Thanks. Basically it’s too late for me to set it up coming from my paycheck in 2019 so if I contribute now it’s with post tax money. Can I still lower my AGI on my tax return by $7k even if I’m using the standard deduction? I usually do my own taxes with H&R block software since my situation is very straight forward but don’t remember a section about that.
Yes, HSA contributions are pre-tax regardless of whether you make them from your paycheck and regardless of whether you take the standard deduction. HSA contribution directly reduce your AGI. The difference between contributing by paycheck or not is that contributing by paycheck you also save the FICA tax. Don't worry about that now - if you can afford to, contribute to the max for 2019.

Just to confirm: your wife is also covered by an HSA eligible plan, right? And she doesn't have an FSA at her job, right?

Topic Author
mjedwards409
Posts: 22
Joined: Sat Mar 30, 2019 5:30 pm

Re: Two HSA Questions

Post by mjedwards409 » Sun Oct 20, 2019 8:07 am

Tamarind wrote:
Sun Oct 20, 2019 7:51 am
mjedwards409 wrote:
Sun Oct 20, 2019 7:38 am
willyd123 wrote:
Sun Oct 20, 2019 7:27 am
Hello -

I'm not sure I understand your first question. Contributing to an HSA will reduce your taxable income regardless of whether you have enough deductions to eclipse the standard deduction amount. HSA contributions are not itemized deductions. HSA contributions are deductions from income like 401(k) contributions and reduce your taxable income. Maybe I don't understand what you are asking.
Thanks. Basically it’s too late for me to set it up coming from my paycheck in 2019 so if I contribute now it’s with post tax money. Can I still lower my AGI on my tax return by $7k even if I’m using the standard deduction? I usually do my own taxes with H&R block software since my situation is very straight forward but don’t remember a section about that.
Yes, HSA contributions are pre-tax regardless of whether you make them from your paycheck and regardless of whether you take the standard deduction. HSA contribution directly reduce your AGI. The difference between contributing by paycheck or not is that contributing by paycheck you also save the FICA tax. Don't worry about that now - if you can afford to, contribute to the max for 2019.

Just to confirm: your wife is also covered by an HSA eligible plan, right? And she doesn't have an FSA at her job, right?
Thank you. And yes wife and kids are all under my plan.

fujiters
Posts: 283
Joined: Tue Mar 06, 2018 2:17 pm

Re: Two HSA Questions

Post by fujiters » Sun Oct 20, 2019 8:25 am

mjedwards409 wrote:
Sun Oct 20, 2019 7:38 am
willyd123 wrote:
Sun Oct 20, 2019 7:27 am
Hello -

I'm not sure I understand your first question. Contributing to an HSA will reduce your taxable income regardless of whether you have enough deductions to eclipse the standard deduction amount. HSA contributions are not itemized deductions. HSA contributions are deductions from income like 401(k) contributions and reduce your taxable income. Maybe I don't understand what you are asking.
Thanks. Basically it’s too late for me to set it up coming from my paycheck in 2019 so if I contribute now it’s with post tax money. Can I still lower my AGI on my tax return by $7k even if I’m using the standard deduction? I usually do my own taxes with H&R block software since my situation is very straight forward but don’t remember a section about that.
Why it that? There are still 2 full months left in the year. If your tell payroll to take out $3.5k/month (actually whatever's left of your 2019 HSA limit), you can hit it, assuming it doesn't take payroll 2 months to process forms.
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

Topic Author
mjedwards409
Posts: 22
Joined: Sat Mar 30, 2019 5:30 pm

Re: Two HSA Questions

Post by mjedwards409 » Sun Oct 20, 2019 10:12 am

fujiters wrote:
Sun Oct 20, 2019 8:25 am
mjedwards409 wrote:
Sun Oct 20, 2019 7:38 am
willyd123 wrote:
Sun Oct 20, 2019 7:27 am
Hello -

I'm not sure I understand your first question. Contributing to an HSA will reduce your taxable income regardless of whether you have enough deductions to eclipse the standard deduction amount. HSA contributions are not itemized deductions. HSA contributions are deductions from income like 401(k) contributions and reduce your taxable income. Maybe I don't understand what you are asking.
Thanks. Basically it’s too late for me to set it up coming from my paycheck in 2019 so if I contribute now it’s with post tax money. Can I still lower my AGI on my tax return by $7k even if I’m using the standard deduction? I usually do my own taxes with H&R block software since my situation is very straight forward but don’t remember a section about that.
Why it that? There are still 2 full months left in the year. If your tell payroll to take out $3.5k/month (actually whatever's left of your 2019 HSA limit), you can hit it, assuming it doesn't take payroll 2 months to process forms.
From what i’ve read id need a qualifying life event to change the payroll deductions outside of open enrollment.

Tdubs
Posts: 858
Joined: Tue Apr 24, 2018 7:50 pm

Re: Two HSA Questions

Post by Tdubs » Sun Oct 20, 2019 10:45 am

mjedwards409 wrote:
Sun Oct 20, 2019 10:12 am
fujiters wrote:
Sun Oct 20, 2019 8:25 am
mjedwards409 wrote:
Sun Oct 20, 2019 7:38 am
willyd123 wrote:
Sun Oct 20, 2019 7:27 am
Hello -

I'm not sure I understand your first question. Contributing to an HSA will reduce your taxable income regardless of whether you have enough deductions to eclipse the standard deduction amount. HSA contributions are not itemized deductions. HSA contributions are deductions from income like 401(k) contributions and reduce your taxable income. Maybe I don't understand what you are asking.
Thanks. Basically it’s too late for me to set it up coming from my paycheck in 2019 so if I contribute now it’s with post tax money. Can I still lower my AGI on my tax return by $7k even if I’m using the standard deduction? I usually do my own taxes with H&R block software since my situation is very straight forward but don’t remember a section about that.
Why it that? There are still 2 full months left in the year. If your tell payroll to take out $3.5k/month (actually whatever's left of your 2019 HSA limit), you can hit it, assuming it doesn't take payroll 2 months to process forms.
From what i’ve read id need a qualifying life event to change the payroll deductions outside of open enrollment.
That isn't correct for my agency, which uses Employee Express. I can go in and request a change to the HSA deduction any time.

Pyrroc
Posts: 5
Joined: Sun Apr 19, 2015 6:00 pm

Re: Two HSA Questions

Post by Pyrroc » Sun Oct 20, 2019 1:56 pm

Tdubs wrote:
Sun Oct 20, 2019 10:45 am
mjedwards409 wrote:
Sun Oct 20, 2019 10:12 am

From what i’ve read id need a qualifying life event to change the payroll deductions outside of open enrollment.
That isn't correct for my agency, which uses Employee Express. I can go in and request a change to the HSA deduction any time.
The companies that I've dealt with all have you set a monthly or annual contribution at enrollment time and which is immutable for that year without a life-change.

Tdubs
Posts: 858
Joined: Tue Apr 24, 2018 7:50 pm

Re: Two HSA Questions

Post by Tdubs » Sun Oct 20, 2019 3:37 pm

Pyrroc wrote:
Sun Oct 20, 2019 1:56 pm
Tdubs wrote:
Sun Oct 20, 2019 10:45 am
mjedwards409 wrote:
Sun Oct 20, 2019 10:12 am

From what i’ve read id need a qualifying life event to change the payroll deductions outside of open enrollment.
That isn't correct for my agency, which uses Employee Express. I can go in and request a change to the HSA deduction any time.
The companies that I've dealt with all have you set a monthly or annual contribution at enrollment time and which is immutable for that year without a life-change.
I wonder why they don't allow that kind of flexibility.

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