Health Savings Account with high medical expenses


B

Barry Gold

I am on Cal-COBRA after working for a small employer. I have an HSA-
compatible policy and an HSA, but my premiums are high (because of my
age) and I use up my deductible and out-of- pociet maximum every year,
and also have a lot of uncovered health expenses because some of my
doctors are out-of-network.

As a result, I can count on my medical expenses exceeding the 8%
threshold for deductibility every year.

ISTM to me that the Health Savings Account is actually not saving me
any money -- I put $3500 (pre-tax) into the HSA and then take it out
again (untaxed), but that $3500 is just $3500 less in deductions once
I exceed the deductibility threshold. But maybe the tax experts here
have a different view?

If it makes a difference, I live (and pay taxes in) California. And I
expect my combined state & federal "next dollar" tax rate to be about
20-25% for the next 3 years (until I start getting Social Security
at age 66).
 
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P

paulthomascpa

Barry Gold said:
I am on Cal-COBRA after working for a small employer. I have an HSA-
compatible policy and an HSA, but my premiums are high (because of my
age) and I use up my deductible and out-of- pociet maximum every year,
and also have a lot of uncovered health expenses because some of my
doctors are out-of-network.

As a result, I can count on my medical expenses exceeding the 8%
threshold for deductibility every year.

ISTM to me that the Health Savings Account is actually not saving me
any money -- I put $3500 (pre-tax) into the HSA and then take it out
again (untaxed), but that $3500 is just $3500 less in deductions once
I exceed the deductibility threshold. But maybe the tax experts here
have a different view?



For one, the pre-tax lowers your AGI, so you can deduct more medical and
possibly other expenses that may be AGI sensitive.

I'd keep doing it.
 
B

Barry Margolin

paulthomascpa said:
For one, the pre-tax lowers your AGI, so you can deduct more medical and
possibly other expenses that may be AGI sensitive.

I'd keep doing it.
More specifically, you can deduct an additional $280 in out-of-pocket
expenses (8% of $3500), on top of the effective $3500 deduction from
this being pre-tax money.
 
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R

removeps-groups

The threshold is 7.5%, or did it change to 8% in one of the recent tax
bills?

Also, under AMT, only deductions in excess of 10% are allowed.

Like stimulus checks, homebuyer's credit, deduction for misc expenses,
phaseout of itemized deduction, AMT exemption, etc.
More specifically, you can deduct an additional $280 in out-of-pocket
expenses (8% of $3500), on top of the effective $3500 deduction from
this being pre-tax money.
That should be $262.50, assuming 7.5%.
 

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