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Hsa Insurance Premiums Question & Answers

2013 September 28
by Sarah Fields

William asks…

Can the cost of my dental discount plan be paid for out HSA funds?

Since the fee for a discount plan is not technically an insurance premium, does that mean I can use my HSA funds to pay for it? Or is it still considered an HSA unqualified expense?

Sarah Fields answers:

Technically they should not have an objection but still you should check out with your employer and HSA administrator.

Nancy asks…

How do I deal with form 5498SA and 1099SA on my tax return?

I think part of my health insurance premium automatically goes into an HSA for me, so they sent me a 5498 saying 1690 contribution. Which line on form 8889 do I put that on and what do I put on another line so it doesn’t try to charge me? I already put the $59 I spent down on the bottom part and offset it…

Sarah Fields answers:

First off check your records. The 5498-SA can be slightly off (it’s not intended for use by you other than the FMV on 12/31 figure).

However, if your HSA is $1690 through premiums at work, the $1690 is supposed to show on your W-2 in box 12 with a code of W. Due to getting files from the health care provider, many companies issue the W-2 *without* the code in the right place.

I know that my HSA was pretax as it came through my cafeteria plan, so my amoutns go on line 9 of the HSA form. Since that’s the money that went in and I already got the tax benefit, I put single and $2900 and followed the form through to $0 extra deduction on line 13.

As for the money you took out, if you spent it on medical items, just put a duplicate amount on line15 to prevent it from being taxed all over again.

Paul asks…

Can I continue to contribute to an HSA after age 65?

I have an HSA (Health Savings Account) and will be 65 the end of this year. Can I continue to contribute to it? Also, if I withdraw money from it after age 65 does it have to be for medical expenses or can I withdraw for anything without a penalty? Also, I have already paid taxes on this money. Am I going to have to pay tax again when I withdraw it?

Sarah Fields answers:

1. To be an eligible individual and qualify for an HSA, you must meet the following requirements.

You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.

You have no other health coverage except what is permitted under Other health coverage , later.

You are not enrolled in Medicare.

You cannot be claimed as a dependent on someone else’s 2009 tax return.

2. Distributions from an HSA used exclusively to pay qualified medical expenses of the account beneficiary, spouse, or dependents are excludable from gross income. (See the line 15 instructions for information on medical expenses of dependents not claimed on your return.) You can receive distributions from an HSA even if you are not currently eligible to have contributions made to the HSA. However, any part of a distribution not used to pay qualified medical expenses is includible in gross income and is subject to an additional 10% tax unless an exception applies.

Qualified Medical Expenses
Generally, qualified medical expenses for HSA purposes are unreimbursed medical expenses that could otherwise be deducted on Schedule A (Form 1040). See the Instructions for Schedule A and Pub. 502, Medical and Dental Expenses (Including the Health Coverage Tax Credit). However, even though non-prescription medicines (other than insulin) do not qualify for the medical and dental expenses deduction, they do qualify as expenses for HSA purposes. Expenses incurred before you establish your HSA are not qualified medical expenses. If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified medical expenses.

You cannot treat insurance premiums as qualified medical expenses unless the premiums are for:

Long-term care (LTC) insurance,

Health care continuation coverage (such as coverage under COBRA),

Health care coverage while receiving unemployment compensation under federal or state law, or

Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap).

3. Not sure how you figure that you have “already paid taxes on this money” because HSA contributions are tax exempt.

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