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.
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%.
•You must be covered under a high deductible health plan. For 2013 these plans must have minimum deductibles of $1,250 for self-only and $2,500 for family coverage. The maximum
deductibles are $6,250 for self-only and $12,500 for family coverage.
•You may not be covered under any other non-high deductible health plan. •You cannot be enrolled in Medicare. •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.
•Are deductible against adjusted gross income for the year they are made. •Can be made in the following year up till April 15th. •Are limited to $3,250 for self-only and $6,450 for family coverage. •Excess contributions are subject to a 6% excise tax unless withdrawn by the return due date
•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.
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