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scotsman1000
Level 3

HSA and medical tax deduction

So here’s what I don’t understand. Let’s say I have $10,000 in medical expenses. My AGI is $60,000. So I can deduct anything over 7.5% of $60,000, or $4,500. So my deduction is $5,500.

 

Can I then use my HSA to refund me the non-deductible part, i.e. $4,500?

 

thank you!

1 Best answer

Accepted Solutions
Opus 17
Level 15

HSA and medical tax deduction

@scotsman1000 

If you read the instructions for schedule A line 1, it is clear in several places that the amount entered on line 1 cannot include any amount that is reimbursed from insurance or cafeteria plans. (Cafeteria plan is a technical term that includes both HSAs and FSAs.). Line 1 is total eligible expenses before the 7.5% floor.   

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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4 Replies
Mike9241
Level 15

HSA and medical tax deduction

any medical expenses paid or reimbursed with your HSA (or FSA or even MSA)  do not qualify as medical expenses for purposes of schedule A.  generally for any expense double dipping is not allowed.  so if you pay $4,500 of medical expenses with your HSA out of $10,000, only $5,500 can be reported on Schedule A. Then that amount would be reduced by 7.5 % of AGI to arrive at your deductible amount. your deduction would now be $1,000 based on what you provided 

Opus 17
Level 15

HSA and medical tax deduction

The short answer is that expenses reimbursed tax-free, by an HSA, FSA, or insurance, must be subtracted first before you take the 7.5% limitation into account.

 

A longer explanation would be that the definition of deductible medical expenses must take into account the 7.5% limitation as defined in the law. In effect, all of your unreimbursed medical expenses are “eligible“, but only eligible expenses over that threshold are actually deductible. All of your unreimbursed expenses are listed on schedule A line 1, and the 7.5% limitation is calculated directly on schedule A lines 2-4.   If you get a reimbursement, you can’t also include the expense on line 1 to satisfy the limitation.   In other words, you are not allowed to use the HSA to defeat the 7.5% limitation.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
scotsman1000
Level 3

HSA and medical tax deduction

Thanks! Yep, that's what I suspected. The language is often confusing, as I read "only expenses over 7.5% are deductible", and "you can re-imburse expenses from HSA that haven't been deducted on Schedule A".

The language used doesn't seem to clarify that you also can't reimburse expenses that have been counted to get to the the 7.5% deductible threshold.

Opus 17
Level 15

HSA and medical tax deduction

@scotsman1000 

If you read the instructions for schedule A line 1, it is clear in several places that the amount entered on line 1 cannot include any amount that is reimbursed from insurance or cafeteria plans. (Cafeteria plan is a technical term that includes both HSAs and FSAs.). Line 1 is total eligible expenses before the 7.5% floor.   

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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