Recording HSA Withdraw


T

tupdegrove

I'm one of those people with a high-deductible HSA (Health Savings
Account). My company contributes $750 each year which is very nice of
them. When I withdraw some of that $750, I'm wondering how to
accurately record it in Quicken 2006. For starters, a "HSA Medical"
assest account was created and at the beginning of each year, an entry
is made for $750. Here is what I originally did for a withdraw but it
isn't quite right.

1. Physically, used debit card to withdraw cash from account and
deposit money into checking account. Now for Quicken.

Method #1
2. Created a transaction in the HSA Medical account reducing the asset
by the withdrawn amount. The category was set to Checking Account. (I
guess the opposite could have been done - Checking Account transaction
as a deposit and the category set to HSA Medical.)

This flawed method has the correct amounts in the HSA Medical and
Checking accounts but no budget category was involved. I'd like my
"medical" category to be reduced by the amount of the withdraw. For
example, at the end of the year, if there is $1000 medical expenses and
all $750 is withdrawn, then the medical category should show my outlay
as only $250.

I haven't tried it but here is a two transaction method that seems like
it would work.

Method #2
1. Create a transaction in the Checking Account as a deposit and select
the medical expense category.

2. Create a transaction in the HSA Medical account to reduce the asset
and select the same HSA Medical account.

Is method #2 okay? Any improvements? Any way to only have one
transaction?

Thanks,
Tim Updegrove
 
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D

Dick Weaver

tupdegrove said:
I'm one of those people with a high-deductible HSA (Health Savings
Account). My company contributes $750 each year which is very nice of
them. When I withdraw some of that $750, I'm wondering how to
accurately record it in Quicken 2006. For starters, a "HSA Medical"
assest account was created and at the beginning of each year, an entry
is made for $750. Here is what I originally did for a withdraw but it
isn't quite right.

1. Physically, used debit card to withdraw cash from account and
deposit money into checking account. Now for Quicken.

Method #1
2. Created a transaction in the HSA Medical account reducing the asset
by the withdrawn amount. The category was set to Checking Account. (I
guess the opposite could have been done - Checking Account transaction
as a deposit and the category set to HSA Medical.)

This flawed method has the correct amounts in the HSA Medical and
Checking accounts but no budget category was involved. I'd like my
"medical" category to be reduced by the amount of the withdraw. For
example, at the end of the year, if there is $1000 medical expenses and
all $750 is withdrawn, then the medical category should show my outlay
as only $250.
The "flawed" method is just fine, you just need to add a year-end
adjustment. But first ....

Why do you want to reduce your medical expense category total? It is,
after all, money you spent on medical care. There are two different
questions that can be asked here: how much medical service did your
family consume? and Who paid for it? The medical category(s) answers
the 1st question and you don't need Quicken to answer the second - as
you already know the answer.

Now for the year-end adjustment (thus keeping you to the single transfer
entry throughout the year): The only thing you need to adjust at year
end is taxable medical expense. Medical expense reimbursed by that $750
- AND YOUR OWN PRETAX CONTRIBUTIONS - is not tax deductable medical
expense. If you are tracking medical expense for tax deductions then
you already have both tax-deductable medical categories and not tax
deductable medical categories, so choose (or create) appropriate
categories and then at year-end make two entries for the total plan
reimbursements:

medical-tax-ded -750
medical-not-ded 750

dick w
 

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