This information is intended to be educational and is not tailored to the investment needs of any specific investor. You can find IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, and IRS Publication 502, Medical and Dental Expenses, online, or you can call the IRS to request a copy of each at 80. You are also encouraged to review information available from the Internal Revenue Service (IRS) for taxpayers, which can be found on the IRS website at IRS.gov. Because the administration of an HSA is a taxpayer responsibility, you are strongly encouraged to consult your tax advisor before opening an HSA. It is not intended, nor should it be construed, as legal or tax advice. If you spend HSA dollars on ineligible expenses, you’ll owe income tax plus a 20. The information provided herein is general in nature. If you put money into an HSA, you can make tax-free withdrawals at any time to fund qualified medical expenses. For more about qualified medical expenses, the IRS provides detailed information about medical and dental expenses and health savings accounts. Contributions, investment earnings, and distributions may or may not be subject to state taxation.Ģ. Tip: Remember, after you enroll in Medicare, you can use existing funds in your HSA for qualified medical expenses, including your monthly premiums for Parts A, B, C, and D (but not Medigap premiums). This HSA restriction leads some working past age 65 to defer Medicare and maintain their current employer-based health insurance coverage so they can keep contributing to their HSA until they retire. Say you have an AGI of 50,000, and your family has 10,000 in medical bills for the tax year. However, you can withdraw those contributions by the end of the tax year to avoid the excise tax. You can deduct unreimbursed, qualified medical and dental expenses that exceed 7.5 of your AGI. Health savings accounts (HSAs), including those that cover long-term-care services: Through HSAs, your employees can cover their qualified medical expenses using the pretax dollars you set aside in your Section 125 plan. So, any product or service billed by a doctor/hospital/urgent care, optometrist, chiropractor, dental clinic (excluding cosmetic) including copays for those visits are all qualified. This "6-month lookback" starts when you enroll in Medicare or begin your Social Security retirement benefits. Qualified: Qualified medical care expenses must be for products or services designed to alleviate or prevent a condition or illness.If you contribute to your HSA during those 6 months, you may face a 6% excise tax and an income tax for those contributions. When you receive Social Security retirement benefits, your Part A coverage is back-dated 6 months (but no earlier than the first month you're eligible for Medicare) to give you 6 months of back-dated benefits.Stop making contributions to your HSA up to 6 months before applying for Medicare Part A only or Part A and Part B or starting your Social Security retirement benefits.“When reimbursing himself from the HSA, it’s important that he maintains proof of payment and documentation that the expenses were eligible, in the event of an audit (although he does not need to submit any receipts to be reimbursed),” says Begonya Klumb, head of HSAs for Fidelity Health Care Group.If you continue to work after age 65, and you or your employer is still contributing to an HSA: As long as you use the money in your account for qualified expensesincluding some over-the-counter medications and health needs like feminine. Money that goes into your FSA isn’t considered taxable income and isn’t reported on your tax return. And you can’t withdraw money for expenses you incurred before you opened up the HSA. A flexible spending account offers a tax benefit while helping you pay for medical costs. You just need to keep receipts showing that you paid for eligible expenses. So if you’ve had an HSA for several years and didn’t realize you could withdraw money tax-free for Medicare premiums, you could reimburse yourself for all of those premiums at any time. You can keep the money growing tax-deferred in the account, then withdraw it tax-free at any time in the future to reimburse yourself for any eligible expenses you have incurred since you opened the HSA. After you turn 65, you can use HSA money tax-free to pay premiums for Medicare parts B and D and Medicare Advantage plans (but not premiums for Medicare supplement policies), in addition to paying for other out-of-pocket medical expenses.Īnd there’s no time limit for withdrawing money from an HSA to pay for those expenses. Answer: Even though you have your Medicare premiums paid directly out of your Social Security benefits, you can withdraw money tax-free from your HSA to reimburse yourself for those expenses.
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