HSA and High Deductible Health Plans (HDHP)

Question 1

What does HDPD stand for?

Answer 1

High Deductible Health Plan

Question 2

What is an HSA?

Answer 2

It is a Health Savings Account that allows a TP to set aside pre-tax dollars to pay for qualified medical expenses

Question 3

What are the benefits of an HSA?

Answer 3

1. TP can deduct contributions they/someone other than the employer made to the HSA
2. Employer contributions are excluded from GI
3. Interest on earnings is tax free
4. Not a use it or loose it plan
5. portable plan

Question 4

What are eligibility requirements for CONTRIBUTIONS to an HSA? (4)

Answer 4

1. Self-only or family HDHP
2. TP is not covered by other health insurance
3. Not enrolled in Medicare
4. TP is not a dependent of another TP

Question 5

Who can contribute to a TP’s HSA? (3)

Answer 5

1. TP
2. Employer
3. Any other person (treated as a gift and tax deductible to HSA owner)

Question 6

Who gets the deduction when someone other than the TP makes a contribution to the TP’s HSA?

Answer 6

The taxpayer

Question 7

What are the contribution limits for an HSA in 2019?

Answer 7

Self-only HDHP: $3500 (2020:3550)
Family HDHP: $7000 (2020:7100)
Catch up for =>55: $1000 (2020:1000)

Question 8

What is the deadline for contributions to an HSA?

Answer 8

Tax return deadline without extensions (usually 4/15)

Question 9

What 4 things determine a TP’s contribution limit for an HSA?

Answer 9

1. age
2. month they become eligible
3. month they cease being eligible
4. Self-only or Family HDHP

Question 10

When is monthly eligibility determined for HSA contributions?

Answer 10

1st day of the month

Question 11

How are contribution limits calculated if the TP is NOT eligible for all months of the year?

Answer 11

1. (total contribution limit*eligible months)/12
   OR
2. Last month rule applies = eligible all months

Question 12

What is the Last Month Rule for HSA contributions?

Answer 12

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

Question 13

If two spouses each have a self-only HDHP plan how are the contribution limits for their HSAs affected?

Answer 13

Each spouse individually uses the self-only HSA contribution limits : 2019:$3500 (2020: 3550)

Question 14

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?

Answer 14

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)

Question 15

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?

Answer 15

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)

Question 16

Can qualified medical expenses reimbursed by an HSA be deducted on Schedule A?

Answer 16

no

Question 17

Requirements for HSA DISTRIBUTIONS to be considered tax free? (2)

Answer 17

1. offset by qualified medical expenses (current/prior years)
2. expenses incurred after HSA was established

Question 18

Are over the counter products without a prescription considered qualified medical expenses?

Answer 18

Yes, if purchased after 12/31/19

*includes menstrual products

Question 19

Is medical marijuana with a perscription a qualified medical expense?

Answer 19

No, because it is not legal on a federal level.

Question 20

Four types of insurance premiums that are considered Qualified Medical Expenses for an HSA distribution

Answer 20

1. Long term care premiums
2. COBRA premiums
3. Premiums while on unemployment
4. Medicare or other coverage premiums if >65 yr old
   * Not supplemental coverage like medi gap

Question 21

Whose qualified medical expenses can a TP use to offset HSA distributions (making them tax free)?

Answer 21

1. TP or spouse
2. Dependents listed on the return
3. 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

Question 22

How are distributions from an HSA for non-qualified medical expenses handled?

Answer 22

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)

Question 23

What form must be filed with your return if there is any activity associated with your HSA?

Answer 23

8889

Question 24

Can mistaken distributions from an HSA be returned to the HSA? How are the mistaken distributions taxed?

Answer 24

1. distributions can be returned is the HSA plan allows for returns.
2. Returns must be done by 4/15 (not tax return deadline)
3. Returns are not taxed and the 20% additional tax is not applied

Question 25

Greg is retired and is 56 years old. Greg pays for a his own self-only HDHP. Can Greg setup and contribute to an HSA if he does not have any earned income?

Answer 25

Yes, if he is an eligible individual. EI does not affect eligibility.

Question 26

What form are HSA distributions reported on?

Answer 26

1099-SA

Question 27

What tax form is included with the 1040 to report HSA contributions/distributions?

Answer 27

8889

Question 28

If Juan has a self-only HDHP can he use his HSA to cover medical expenses for his spouse and children?

Answer 28

yes

Question 29

Joe is 19 years old and reported as a dependent on his father’s (Bill) return. Joe has a HDHP through work. Can you setup an HSA? Can Joe use the HSA to offset his medical expense and the medical expenses of his son(Gabe)?

Answer 29

Yes.

Note: Joe can offset Gabe’s expenses because he would have qualified as a dependent if Joe wasn’t Bill’s dependent.