HSA and High Deductible Health Plans (HDHP) Flashcards
What does HDPD stand for?
High Deductible Health Plan
What is an HSA?
It is a Health Savings Account that allows a TP to set aside pre-tax dollars to pay for qualified medical expenses
What are the benefits of an HSA?
- TP can deduct contributions they/someone other than the employer made to the HSA
- Employer contributions are excluded from GI
- Interest on earnings is tax free
- Not a use it or loose it plan
- portable plan
What are eligibility requirements for CONTRIBUTIONS to an HSA? (4)
- Self-only or family HDHP
- TP is not covered by other health insurance
- Not enrolled in Medicare
- TP is not a dependent of another TP
Who can contribute to a TP’s HSA? (3)
- TP
- Employer
- Any other person (treated as a gift and tax deductible to HSA owner)
Who gets the deduction when someone other than the TP makes a contribution to the TP’s HSA?
The taxpayer
What are the contribution limits for an HSA in 2019?
Self-only HDHP: $3500 (2020:3550)
Family HDHP: $7000 (2020:7100)
Catch up for =>55: $1000 (2020:1000)
What is the deadline for contributions to an HSA?
Tax return deadline without extensions (usually 4/15)
What 4 things determine a TP’s contribution limit for an HSA?
- age
- month they become eligible
- month they cease being eligible
- Self-only or Family HDHP
When is monthly eligibility determined for HSA contributions?
1st day of the month
How are contribution limits calculated if the TP is NOT eligible for all months of the year?
- (total contribution limit*eligible months)/12
OR - Last month rule applies = eligible all months
What is the Last Month Rule for HSA contributions?
A tp is eligible for all months of the year if they are eligible on the 1st day of the last month of the tax year AND
they remain eligible for 12 months (ex: 12/1/19-12/31/20)
**if taxpayer does not remain eligible after tax deduction has been taken then the deduction must be recaptured
If two spouses each have a self-only HDHP plan how are the contribution limits for their HSAs affected?
Each spouse individually uses the self-only HSA contribution limits : 2019:$3500 (2020: 3550)
If one spouse has a self-only HDHP and the other spouse has a family HDHP then how are the contribution limits for their HSAs affected?
Both spouses are treated as if they have family HDHP. The contribution is divided between spouses in any way they agree to (1/2 each if they can’t agree)
Ray (58) and Katie (53) are filing MFJ and have two kids. Ray participates in a self-only HDHP and Kate participates in a family HDHP. What are their contribution limits for their HSAs?
2019: Ray and Kate are limited to the Family HDHP amount of $7000 and a portion is applied to each person (ie: Ray $6500 and Kate $500)
In addition, Ray’s limit is increased by the catch up amount of $1000 (Ie: Ray’s total limit $7500 and Katie’s total limit would be $500)
Can qualified medical expenses reimbursed by an HSA be deducted on Schedule A?
no
Requirements for HSA DISTRIBUTIONS to be considered tax free? (2)
- offset by qualified medical expenses (current/prior years)
- expenses incurred after HSA was established
Are over the counter products without a prescription considered qualified medical expenses?
Yes, if purchased after 12/31/19
*includes menstrual products
Is medical marijuana with a perscription a qualified medical expense?
No, because it is not legal on a federal level.
Four types of insurance premiums that are considered Qualified Medical Expenses for an HSA distribution
- Long term care premiums
- COBRA premiums
- Premiums while on unemployment
- Medicare or other coverage premiums if >65 yr old
* Not supplemental coverage like medi gap
Whose qualified medical expenses can a TP use to offset HSA distributions (making them tax free)?
- TP or spouse
- Dependents listed on the return
- Other individuals that would have been listed as dependents except:
- they filed MFJ
- they failed the GI test
- Divorced/separated parents: both parents qualify to claim expenses
- If TP/spouse are dependent of another person and normally could not claim dependents on their return - they can still claim medical expense offsets for those dependents
How are distributions from an HSA for non-qualified medical expenses handled?
Distributions are taxed at the regular tax rate and will also have an additional tax of 20% (Exceptions to additional tax: the TP has died, become disabled or is >65)
What form must be filed with your return if there is any activity associated with your HSA?
8889
Can mistaken distributions from an HSA be returned to the HSA? How are the mistaken distributions taxed?
- distributions can be returned is the HSA plan allows for returns.
- Returns must be done by 4/15 (not tax return deadline)
- Returns are not taxed and the 20% additional tax is not applied
