HSA Help

[rmorris50]

Hi - for 2021 we switched to my health insurance. I didn’t sign up for HSA contributions, mostly because I thought I wouldn’t stay there and didn’t want to lock up more money into another pretax account, and we are in pretty good health.

However, my HDHP still set up my HSA and set me the card and login info. I decided to register the account and login and poke around. Didn’t realize I could contribute my own after tax dollars and have them be tax deductible. Any income or other restrictions on this?  Should I just plow 7500 in there all at one? I don’t think I can ask for pre-tax contributions out of my paycheck at this point.

And now that this account is set up, it’s ours forever, no matter job status? And I can contribute up to the limit every year no matter my job status? I did see there are some restrictions, for example if you’re on Medicare.

Thanks!


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[maizefolk]

Yes the account is yours forever regardless of job status.
No you cannot contribute $7,500 every year regardless of insurance status, only in years when your family is covered by a HDHP that qualifies for an HSA.

My employer lets me adjust my contribution to my HSA account once a month. If yours does this is superior to contributing your own money since payroll deductions are exempt from income tax and ALSO exempt from social security/medicare tax, while your own contributions are only exempt from income tax.

[rmorris50]

Thanks. It looks like I was able to change my contributions on the HR website, so I’ll see if that actually works. I also see in the HSA account where to add additional HDHPs. So hopefully this works out.

And other tidbits I should know about HSA??


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[maizefolk]

Hmm, what else.

Have you come across the hack that there is no time limit on when you claim reimbursement for medical expenses from the HSA? So if you want to let your contributions grow tax free for as long as possible you can just pay for medical expenses out of pocket, keep a file cabinet full of your own receipts, and decades later when you'd like to draw money out of the HSA, submit the receipts and it comes out completely tax free (no income or payroll tax when you contribute, no income or payroll tax when you withdraw).

[terran]

The HSA limit for 2021 for family coverage is $7200. You can contribute 1/12 of this amount for any month in which you're covered by the HDHP on the 1st. If either spouse is over 55 years old they can contribute an extra $1000, but your spouse would have to open their own HSA to do so as they can't contribute their catch up to your HSA. You can contribute it all at once if you want, but you'll have to remove some if you don't remain covered all year.

[rmorris50]

The HSA limit for 2021 for family coverage is $7200. You can contribute 1/12 of this amount for any month in which you're covered by the HDHP on the 1st. If either spouse is over 55 years old they can contribute an extra $1000, but your spouse would have to open their own HSA to do so as they can't contribute their catch up to your HSA. You can contribute it all at once if you want, but you'll have to remove some if you don't remain covered all year.

This is very useful to know, thanks. Also, that hack sounds interesting, even tho I am not sure I have the patience to pull that off maybe for a year or two, not sure about years later. But to your point, guess you could just keep letting it grow to pay for a large medical expense years later, and if that never happens just file your old receipts at some point.


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[chuckster]

This is very useful to know, thanks. Also, that hack sounds interesting, even tho I am not sure I have the patience to pull that off maybe for a year or two, not sure about years later. But to your point, guess you could just keep letting it grow to pay for a large medical expense years later, and if that never happens just file your old receipts at some point.

I've had an HSA for about 5 years. I've saved $12,000 in receipts from stuff I've paid for out of pocket since starting it... anything FSA eligible like eyeglasses, sunglasses, sunscreen, condoms, my sleep apnea supplies from my DME, doctor visit co-pays, dental fillings, prescriptions, regular STD tests, a TENS machine... etc. Just stuff I was going to buy that insurance doesn't 100% cover, pay out of pocket and save the receipt to reimburse myself later.

So far I have about 175 items listed on a spreadsheet on a new tab in my Excel budget. So I guess the average out-of-pocket is $70, it adds up fast. I have a PDF scan of the receipt, plus a scan of the credit card bill and/or Amazon order or whatever other backup I have of the purchase.

That $12,000 is part of my emergency fund. I know, any time I want, I can cash out that $12,000 with no penalty. Something breaks in the house, something breaks on my car, anything random comes up... that's $12,000 I can have in my hand in 2-3 days.

But I've kept it all invested in stocks and index funds and that $12,000 has grown by about $8500 more inside the tax shelter. Extra return!



BUT, even at the very least.... if you don't feel like going through the trouble of saving receipts digitally for years (don't save paper receipts, those heat-ink CVS receipts go bad in a year), don't use the HSA debit card to buy anything. Use any rewards credit card you have, even if it's just for a 2% cash back, then reimburse yourself when the bill comes and pay it off with that. That way you get yourself an extra 2% tax-free on top of what you're getting reimbursed for. My $12,000 has generated $240 in cash back, for example, while if I paid with the HSA card it wouldn't have been any extra benefit.

[MDM]

And other tidbits I should know about HSA??

For an IRS document, the HSA portion of Publication 969 is readable.  It covers most issues.