HEALTH SAVINGS ACCOUNTS
A health savings account is a savings account set up exclusively for paying the taxpayer, spouse and dependent’s “qualified medical expenses”. HSA’s can be with and financial institution approved by the IRS. Qualified medical expenses are the same as allowed for itemized deductions.
2011 Tax Law Changes – Beginning in 2011 the new tax law excludes the costs of over the counter drugs not prescribed by a doctor from qualifying for a tax free HSA distribution. The penalty for non-qualified distributions is increased from 10% to 20%.
Eligibility Requirements:
•
You must be covered under a high deductible health plan. For 2010 these plans must have
You must be covered under a high deductible health plan. For 2010 these plans must haveminimum deductibles of $1,200 for self-only and $2,400 for family coverage. The maximum deductibles are $5,950 for self-only and $11,900 for family coverage.
•You may not be covered under any other non-high deductible health plan.
You may not be covered under any other non-high deductible health plan.•You cannot be enrolled in Medicare.
You cannot be enrolled in Medicare.•You cannot be claimed as a dependent on another person’s return.
You cannot be claimed as a dependent on another person’s return.•If either spouse has family coverage, both spouses are treated as having family coverage.
If either spouse has family coverage, both spouses are treated as having family coverage.Contributions
•Are deductible against adjusted gross income for the year they are made.
Are deductible against adjusted gross income for the year they are made.•Can be made in the following year up till April 15th.
Can be made in the following year up till April 15th.•Are limited to $3,050 for self-only and $$6,150 for family coverage.
Are limited to $3,050 for self-only and $$6,150 for family coverage.•Excess contributions are subject to a 6% excise tax unless withdrawn by the return due date
Excess contributions are subject to a 6% excise tax unless withdrawn by the return due date including extensions.
Withdrawals
•Distributions used to pay “qualified medical expenses” for covered individuals are tax free.
Distributions used to pay “qualified medical expenses” for covered individuals are tax free.•“Nonqualified distributions” are subject to ordinary income tax and a 20% penalty.
“Nonqualified distributions” are subject to ordinary income tax and a 20% penalty. Taxpayers should always seek advice
based on the taxpayer’s particular circumstances
from an independent tax advisor.
Beucler Company CPA, Inc.
2503 Summit St.
Columbus, OH 43202
(614) 784-1099
