Author Topic: Empty (New) HSA Account and $6000 in medical bills - how to save the most $?  (Read 772 times)

lukebuz

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So, I am just started a new HDHP that has an HSA with it this year.  There is basically $0 in it now, and we just had a child and extended stay.  Out of Pocket bills will be around $6,000.

I have the $6,000 in cash to pay the bills - but want to save the max I can.  How is it best to do this?  Please help me understand - I have done my homework, but still fuzzy:

-Can I just put the $6,000 cash into my HSA, pay the bills from the HSA, and get a tax benefit at tax filing next year?  Does this $6,000 basically come off of your taxable income?
-I read at the linked article below, if you contribute from your payroll, you avoid the the FICA tax also.  Another 8%.  Given I have the liquid cash to pay the $6,000, could I just defer 100% of my checks into the HSA until it's maxed out?
https://www.madfientist.com/ultimate-retirement-account/
"When you contribute to your HSA via an automatic payroll deduction, you are able to avoid paying FICA taxes (i.e. Social Security and Medicare) on your contributions."

If you know anything better, open to suggestions!

Thanks!

MDM

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So, I am just started a new HDHP that has an HSA with it this year.  There is basically $0 in it now....
One thing depends on your definition of "basically" and the laws of your state: whether that HSA has been "established."

See Pub. 969: "For HSA purposes, expenses incurred before you establish your HSA arenít qualified medical expenses. State law determines when an HSA is established."  In many (most?) states, the HSA is not established until at least $1 has been deposited.

missundecided

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If the medical service occurred after the HSA was opened, you can pay the bill with your cash directly, and then reimburse yourself when the HSA has the funds.

lukebuz

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So, I am just started a new HDHP that has an HSA with it this year.  There is basically $0 in it now....
One thing depends on your definition of "basically" and the laws of your state: whether that HSA has been "established."

See Pub. 969: "For HSA purposes, expenses incurred before you establish your HSA arenít qualified medical expenses. State law determines when an HSA is established."  In many (most?) states, the HSA is not established until at least $1 has been deposited.

Thanks for the heads up, but we should be good.  Employer deposited a small bit on Jan 15th, and Birth was Feb 6th!

lukebuz

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If the medical service occurred after the HSA was opened, you can pay the bill with your cash directly, and then reimburse yourself when the HSA has the funds.

Great!  So how can I fund the HSA?   This seems totally silly - but do I send my cash to the HSA, then pay via that?  Or does it have to come from Payroll deductions?

MDM

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Great!  So how can I fund the HSA?   This seems totally silly - but do I send my cash to the HSA, then pay via that?  Or does it have to come from Payroll deductions?
That depends on the HSA provider.  Call and ask.  Many allow you to set up electronic transfers between your checking account and the HSA. 

If you do it through payroll, you avoid the FICA deductions as well as the income tax.  But then you don't get credit for that amount of SS earnings.  How important that is depends on your overall finances.

The money does have to "go through" the HSA for you to get the tax benefits.  It doesn't matter whether you pay the $6K now and reimburse yourself later, or withdraw from the HSA "in order to" pay the $6K.