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HSA advice needed.

Discussion in 'Non-Vegas Chat' started by Joe, Aug 27, 2014.

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  1. Joe

    Joe VIP Whale

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    We each have a HSA medical account. The only reason I have them is to make a contribution every year to lower our taxable income. Otherwise it just sits there growing tax differed.
    We now have a repeating medical expense (acupuncture) that insurance will not cover, but it is considered a legitimate expense for the HSA.

    Unless I'm missing something, I can't see using tax deferred money to pay something I could afford to pay out of pocket. There is no reduction in fees using the HSA.

    Any advice appreciated.
     
    Christmas
  2. saintpauljeff

    saintpauljeff VIP Whale

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    isn't that the reduction in fees- you lowered taxable income and pay less taxes
     
  3. Sonya

    Sonya Queen of VMB

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    My husband loves the HSA, but I think it's a hassle. If you itemize at the end of the year, you deduct medical costs anyways, so it seems like a wash to me. It's an advantage if you don't itemize though.
     
  4. Joe

    Joe VIP Whale

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    I meant there is no reduction in fees as when something is submitted to our health insurance company and they allow X amount for a procedure. Then the provider accepts the lower amount.
     
    Christmas
  5. saintpauljeff

    saintpauljeff VIP Whale

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    An HSA is just a tax deferred account used for medical-related expenses. It's handy when your contributions come from payroll as they are tax-free. I always think of that as a "30% discount" on whatever I spend HSA monies on.

    I guess I don't know what brought up the fee reduction idea...
     
  6. progrocker2112

    progrocker2112 Low-Roller

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    Then don't until you have a medical expense you can't afford out of pocket. It'll still be there when you do need it.

    Personally I use my HSA debit card every chance I get because I've got well over my annual maximum out of pocket in it and my employer puts in ten times as much as I do every year. I can't use that comp to buy a beer (well, without taxes and penalty anyways), so I'll buy a prescription instead.

    My HSA is also in a brokerage account, so I try to take the 'extra' cash I have over my maximum out of pocket and eke out a hundred extra bucks here and there with stock trading. Tax deferred contributions, tax deferred earnings, tax free withdrawals for qualified expenses...you can't beat it if you qualify to have one.
     
  7. HoyaHeel

    HoyaHeel Grammar Police & Admin

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    Isn't that only when medical costs are more than a certain %? I feel like I haven't ever met the bar for itemizing medical costs. But I *do* use a medical savings account because - as stated above - it's pre-tax $ removed from my paycheck....
     
  8. Joe

    Joe VIP Whale

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    I just meant that there is no advantage in using the HSA to pay a bill vs. out of pocket. I'm retired, so no company match or payroll reduction. I self fund it every year.
     
    Christmas
  9. saintpauljeff

    saintpauljeff VIP Whale

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    The advantage is the tax avoidance. That's what I eluded to in my first point, paying less taxes is the "reduction", that's how I'd think of it as.

    If the tax benefit isn't worth the trouble of locking up the money in the HSA, no, probably not an advantage then.
     
  10. HoyaHeel

    HoyaHeel Grammar Police & Admin

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    If you are self funding your HSA with tax deferred dollars, as stated above - your savings is what the tax on that money would otherwise be.

    If you're just throwing income on which you've already paid taxes into a different account, then no, no reason to do that.
     
  11. Joe

    Joe VIP Whale

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    I self fund with post tax dollars. The advantage is that it lowers my AGI.

    But my original point was that I can't see using that HSA money to pay bills if I can afford out of pocket expenses. Let the money grow tax differed.
     
    Christmas
  12. HoyaHeel

    HoyaHeel Grammar Police & Admin

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    Well, most people use medical savings accounts to spend pre-tax dollars and it has nothing to do with whether or not they can afford the out of pocket expenses. If that's not your situation, then don't do it. There, you've answered your own question.
     
  13. Hobofrank

    Hobofrank Prime Minister of Idiocracy

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    we have a family HSA as well we max out the contributions each year for the same reason as you (lower AGI), in addition you should invest the portion over the yearly deductible needed to get some interest and pay out of pocket if the chiro stuff isn't that much on a yearly basis, because the HSA rolls into an extra retirement acct at age 65, so you get to sock away even more tax deferred income
     
  14. Sonya

    Sonya Queen of VMB

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    Yes, but I don't remember the exact number anymore. I celebrated last year when we didn't meet the minimum to deduct the medical expenses. Funny how not having to have 3 surgeries per year does that to your budget. That was a huge win for me, healthwise, but Dan cried about how we "wasted" the copays by not putting it in the HSA. I'm guessing he'll insist on signing up at the new job. :haha:
     
  15. Hobofrank

    Hobofrank Prime Minister of Idiocracy

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    wait Joe, you mean Pretax dollars right?, otherwise how is it lowering your AGI?
     
  16. Joe

    Joe VIP Whale

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    I already paid taxes on that money. On the 1040, line 25 is a deduction for HSA contributions which then lowers your AGI.
     
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  17. progrocker2112

    progrocker2112 Low-Roller

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    As far as I know, by taking that deduction from AGI your contribution becomes pretax dollars, like a Traditional IRA. No, it's not a deferral because it didn't come out of a paycheck before FIT was withheld, but the principal contributions will still be taxable upon withdrawal if not used for qualified medical expenses. If you use your HSA only for qualified expenses then the distinction becomes moot (unlike a Traditional IRA) as you benefit both from the tax deduction when contributed and tax free withdrawal.
     
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