HSA Distributions

[Diamond Jim]

I itemize deductions and use qualified medical expenses as part of my deduction.  Can I reimburse myself from my HSA for the expenses excluded by the 10% of AGI rule on a tax free basis?

[Critter]

You can BUT you would need to amend your return to reduce your deduction ... your thought process is flawed. If you reimburse yourself then those amounts cannot be enter on the sch A at all.

[dmertz]

To say it another way, medical expenses paid or reimbursed with a distribution from your HSA are not permitted to be included on line 1 of Schedule A.

[Hal_Al]

Example: You have a total of $10,000 in medical expenses  and you take a $4000 distribution from your HSA. On Schedule A, you may only claim $6,000 of medical expenses and the $6000 is then reduced by 7.5% of your AGI (10% in years prior to 2018).

The $4000 distribution is tax free.

[Diamond Jim]

Thank you for the quick response.  I knew that this was a long shot but in the words of W. C. Fields when he was discovered reading the Bible on his death bed..... "I was just looking for loopholes."

[BMcCalpin]

If you have an HSA, TurboTax works in a non-obvious way that can confuse you.

When you enter your medical expenses in the Medical interview as noted above, TurboTax expects you to enter ALL of your medical expenses, even the ones reimbursed by an HSA distribution.

Why? Because TurboTax will automagically subtract the amount of the HSA distributions from your listed medical expenses, in order to get to the right number as described above for Schedule A.

There is a screen at the end of the Medical interview that mentions this, but I have noticed that a number of taxpayers either miss this screen or don't understand what it means.

Since most taxpayers tend not to enter in the Medical interview medical expenses that they know were reimbursed from an HSA, rather than going back and adding all the individual medical expenses (that were reimbursed), it's easier to just make a single Miscellaneous entry at the end of the Medical interview with the description of "HSA reimbursed expenses" and the dollar amount of the HSA distribution (from the 1099-SA).

So, to follow the example above, if you had $10,000 in total medical expenses, $4,000 of which were reimbursed from your HSA, you would either (1) enter all $10,000 of the expenses in the Medical interview (knowing that TurboTax was going to subtract the $4,000 out), or (2) enter the expenses for the $6,000 that was not reimbursed and a single miscellaneous entry of $4,000 for "HSA reimbursed expenses".

Note that in either case, if the non-reimbursed medical expenses exceed the 7.5% Schedule A limit, then the excess will appear on Schedule A (if you can otherwise itemize your deductions).