Year End Health Savings Account Tax Strategies

Yearend Health Savings Account Tax Strategies
2018 is​ just around the​ corner,​ and there are several issues to​ consider if​ you​ currently have an Health Savings Account HSA,​ or​ are planning on​ getting one in​ the​ near future.
100% of​ the​ deposit you​ place in​ your HSA is​ deductible on​ your federal income taxes. All but four states also make HSA contributions taxdeductible on​ state income taxes. if​ you​ are looking to​ reduce your 2018 tax burden and put away more money for retirement,​ your HSA is​ the​ first place you​ should put your money if​ you​ have not yet maximized your contribution.
The maximum you​ can contribute to​ your HSA in​ 2018 is​ the​ lesser amount of​ your deductible,​ or​ $2,​700 for singles and $5,​450 for families. Individuals who are 55 or​ older may contribute an additional $700. Note that contribution limits are prorated,​ based on​ the​ number of​ complete months during the​ year in​ which you​ have a​ qualifying HSA health insurance plan.
You have until April 15 or​ later if​ you​ file for an extension to​ make your 2018 contribution. if​ you​ do not fully fund your account for the​ current year,​ you​ cannot make a​ catchup contribution for 2018 after this deadline. However,​ you​ can reimburse yourself in​ later years for qualified expenses incurred in​ 2018,​ even if​ you​ do not have the​ funds in​ your account to​ reimburse yourself at​ this time.
In 2018,​ the​ maximum annual HSA contribution will go up to​ $2,​850 for individuals and $5,​650 for families. Individuals 55 or​ older will be allowed to​ contribute an additional $800.
To maximize your tax benefit for 2018,​ it​ is​ important to​ have your HSAqualified health coverage in​ place no later than January 1.
In order to​ pay for a​ medical expense from your HSA,​ it​ must be a​ qualified expense. Some of​ these qualified expenses include dental expenses,​ eyeglasses,​ chiropractic visits,​ overthecounter medications,​ and sometimes even nutritional supplements.
Now is​ a​ good time to​ make sure you​ have an accurate record of​ your medical expenses for the​ year. Make sure you​ separate the​ expenses for which you​ have reimbursed yourself from your HSA from those that you​ paid for outofpocket. Youll want to​ keep receipts for all medical expenditures paid from your HSA with your 2018 tax records. Place the​ nonreimbursed medical expenses in​ a​ separate file,​ keeping them with the​ concurrent years tax records in​ whatever year you​ decide to​ reimburse yourself.
The penalty for overfunding your HSA is​ a​ whopping 6%. you​ have until April 15,​ 2018 to​ withdraw excess funds for the​ 2018 tax year to​ avoid the​ penalty. Your HSA administrator may notify you​ of​ any overfunding,​ but they are under no obligation to​ do so. it​ is​ your responsibility,​ so make sure you​ check into this if​ you​ think your may have overfunded you​ account.
The minimum deductible for HSAcompatible health insurance plans in​ 2018 was $1,​050 for individuals and $2,​100 for families. in​ 2018 this will increase to​ $1,​100 for individuals and $2,​200 for families. if​ you​ currently have an HSAqualified plan with the​ lowest eligible 2018 deductible,​ that deductible will automatically go up on​ January 1 to​ the​ new minimum.
Strategies to​ Maximize Your Tax Benefits
There are basically three different strategies you​ can take when deciding how to​ fund your health savings account.
1. Put no money in​ the​ account,​ except when you​ incur a​ medical expense. This strategy allows you​ to​ legally launder any money used to​ pay medical expenses. in​ other words,​ by depositing money into your HSA,​ then immediately withdrawing it​ to​ reimburse yourself for medical expenses,​ you​ are making your medical expenses all taxdeductible. you​ may want to​ use this strategy if​ you​ are on​ a​ tight budget and want to​ keep your cash outlay as​ low as​ possible.
2. Fully fund the​ account,​ or​ at​ least put in​ as​ much as​ possible based on​ your budget. Take money out of​ the​ account any time medical expenses are incurred,​ and let the​ rest grow taxdeferred. This strategy will maximize your tax deduction,​ while making your HSA funds available to​ pay any noncovered medical expenses before your deductible is​ met.
3. Fully fund the​ account,​ but pay all medical expenses from a​ nonHSA account. Reimburse yourself for medical expenses at​ a​ later date. This strategy will allow you​ to​ maximize your tax deduction,​ and will also allow you​ to​ maximize the​ taxdeferred growth of​ your HSA. you​ can then reimburse yourself,​ taxfree,​ at​ any time in​ the​ future for medical expenses incurred over the​ ensuing years.
To maximize the​ potential growth of​ your funds,​ you​ may want to​ make your 2018 deposits as​ early in​ the​ year as​ possible. Any growth in​ your account is​ taxdeferred,​ like an IRA. if​ possible,​ you​ should plan to​ make your deposit the​ first week in​ January.
Year End Health Savings Account Tax Strategies Year End Health Savings Account Tax Strategies Reviewed by Henda Yesti on July 07, 2018 Rating: 5

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