Author Topic: How to make HSA Contribution post-fire, Pre Tax?  (Read 1377 times)

h2ogal

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How to make HSA Contribution post-fire, Pre Tax?
« on: September 22, 2016, 07:03:57 AM »
Hello - sorry if this was explained elsewhere, could not find it.

Now that I am FIRE, how do I make HSA contributions PRE-Tax?   Im not old enough to start withdrawals from 401k/IRA yet.   I am living off savings from Taxable savings accounts for the next several years. I have had a lot of unexpected med bills and my HSA is getting low.

The HSA is in my name, but is a family HSA and I use it to cover me, DH, DS.  DH is a business owner.  Not sure if we can use his income for contributing pre-tax to HSA.  We were told by insurance that as the business owner he could not pay for health insurance pre-tax. 

Also - Does your HSA max contribution go up for the year if you change plans mid year?  (the max out of pocket does) Case in point -  I already contributed the annual "max" into my HSA this year.  But due to leaving my job I had to switch insurance plans mid-year.   I am now restarting from scratch with my out of pocket max (so although we already spent X amount on medical bills while on my old HD plan, I am back at "0" on my new HD plan.)

Can you take $ tax and penalty free from a 401k or IRA to fund an HSA?   (like a rollover?)

I called Fidelity and asked my assigned financial planner, but he did not know the answer.   

Hope one of the POST FI folks can help!

Nothlit

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Re: How to make HSA Contribution post-fire, Pre Tax?
« Reply #1 on: September 22, 2016, 07:32:29 AM »
Just make the contribution and then deduct it on your 1040? The main reason most people want to contribute to their HSA through pre-tax payroll deduction is that it also saves them on FICA taxes, which can't be recovered after the fact like income tax can, but that's of no concern to you if you are not working.

However, if you have already maxed contributions for the year, then I don't think you can contribute any more this year even if you switched plans. Max OOP is an insurance company limitation, so of course that resets if you change plans. Max contribution is an IRS limitation that applies to you as an individual, not a specific plan.
« Last Edit: September 22, 2016, 07:36:09 AM by Nothlit »

h2ogal

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Re: How to make HSA Contribution post-fire, Pre Tax?
« Reply #2 on: September 22, 2016, 07:36:31 AM »
Thanks!  I have only had the HSA for 2 years and since it was taken out of my paycheck I was not aware how to 'deduct' it.  I will make sure to look for that in turbo tax next year.


Axecleaver

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Re: How to make HSA Contribution post-fire, Pre Tax?
« Reply #3 on: September 22, 2016, 07:54:18 AM »
You could also transfer the HSA balance to another provider, if you want, and have his business enroll you as a family in the plan. Additionally, you can choose to make a one-time (lifetime) transfer from your IRA to your HSA account, which sounds ideal in your situation. I am not sure what the limitations are for this transfer.

Quote
We were told by insurance that as the business owner he could not pay for health insurance pre-tax.
Sort of. If it's an S corp, your company _may_ pay for the plans and write it off as a business expense, but you still have to pay federal taxes (but not payroll taxes - see second link below) on it for shareholders/owners. If it's a sole proprietorship or LLC, or an S corp that paid regular wages, you can take the self employed health insurance deduction for it on your 1040. I use the second method.

https://www.irs.gov/publications/p535/ch06.html
https://www.irs.gov/pub/irs-pdf/p15b.pdf

"S corporation shareholders. Because you can't treat
a 2% shareholder of an S corporation as an employee for
this exclusion, you must include the value of accident or
health benefits you provide to the employee in the employee's
wages subject to federal income tax withholding.
However, you can exclude the value of these benefits
(other than payments for specific injuries or illnesses)
from the employee's wages subject to social security,
Medicare, and FUTA taxes."

Zane benefits offers some plans targeted to small businesses that help you navigate this. https://www.zanebenefits.com/blog/are-health-insurance-costs-a-tax-write-off

Trudie

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Re: How to make HSA Contribution post-fire, Pre Tax?
« Reply #4 on: September 22, 2016, 08:19:28 AM »
Line 25, 1040.

h2ogal

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Re: How to make HSA Contribution post-fire, Pre Tax?
« Reply #5 on: September 22, 2016, 09:04:13 AM »
You could also transfer the HSA balance to another provider, if you want, and have his business enroll you as a family in the plan. Additionally, you can choose to make a one-time (lifetime) transfer from your IRA to your HSA account, which sounds ideal in your situation. I am not sure what the limitations are for this transfer.

Quote
We were told by insurance that as the business owner he could not pay for health insurance pre-tax.
Sort of. If it's an S corp, your company _may_ pay for the plans and write it off as a business expense, but you still have to pay federal taxes (but not payroll taxes - see second link below) on it for shareholders/owners. If it's a sole proprietorship or LLC, or an S corp that paid regular wages, you can take the self employed health insurance deduction for it on your 1040. I use the second method.

https://www.irs.gov/publications/p535/ch06.html
https://www.irs.gov/pub/irs-pdf/p15b.pdf

"S corporation shareholders. Because you can't treat
a 2% shareholder of an S corporation as an employee for
this exclusion, you must include the value of accident or
health benefits you provide to the employee in the employee's
wages subject to federal income tax withholding.
However, you can exclude the value of these benefits
(other than payments for specific injuries or illnesses)
from the employee's wages subject to social security,
Medicare, and FUTA taxes."

Zane benefits offers some plans targeted to small businesses that help you navigate this. https://www.zanebenefits.com/blog/are-health-insurance-costs-a-tax-write-off

Axecleaver, thanks SO much!  Im in NY also and this will definitely help.  I really appreciate this!