Im sole proprietor self employed is it a better deduction to contribute to my personal HSA account or write off medical expenses under the self employed medical deduction

[paul.butler@yaho]

Expecting my total AGI to be about $30,000

[dmertz]

There is no "self-employed medical deduction."  There is only a self-employed health-insurance deduction for the premiums for a health insurance plan established under the business (or in your name).  Other than health insurance premiums paid after you reach age 65, continuation coverage under COBRA and health insurance coverage while receiving unemployment compensation, health insurance premiums cannot be paid from your HSA, so, generally, what can be paid from your HSA is entirely distinct from what can be deducted on Schedule 1 line 16.

Are you asking about medical expenses other than insurance premiums, about insurance premiums that are permitted to be paid with an HSA distribution, or something else?

[Opus 17]

You can't deduct medical expenses that way.

If you buy a policy, you may be able to deduct the premiums as a business expense, but not other out of pocket medical expenses.

If you buy a qualifying HDHP and have no other disqualifying coverage, you can contribute to an HSA--those contributions would be reported on your personal tax return, not on schedule C as a business deduction.

If you have funds in an HSA, you can use those funds to pay for qualified medical expenses for yourself, your spouse, and your dependents.  Qualified medical expenses are out of pocket medical costs but not insurance premiums.  You will save more in taxes if you pay the expenses from an HSA instead of trying to take the medical expense deduction as an itemized deduction subject to the 7.5% limit.  

[Mike9241]

assuming you qualify to have an HSA (post back if you are unsure) then it's better to have one than to take an itemized deduction for deductible medical expenses like doctors, hospital, qualified medications and other deductible medical expenses.  to get any benefit from medical expenses reported on schedule A they are first reduced by 7.5 % of adjusted gross income and then your total itemized deductions (schedule A) must exceed your standard deduction.  an HSA contribution reduces your adjusted gross income. if your itemized deductions exceed $30,000 (mortgage interest, contributions, taxes (as limited) then it's likely there would be no tax benefit to contributing to an HSA.

[Opus 17]

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@Mike9241 wrote:

 an HSA contribution reduces your adjusted gross income. if your itemized deductions exceed $30,000 (mortgage interest, contributions, taxes (as limited) then it's likely there would be no tax benefit to contributing to an HSA.

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Are you sure that's correct?  I would at least qualify that by saying that in this case, where the taxpayer's gross income is expected to be $30,000, an HSA would not help if their itemized deductions are over $30,000.  That comment certainly doesn't apply to other taxpayers. 

And it ignores the long term benefits of the HSA.  Since money earns interest tax-free, and can be withdrawn at age 65 for any purpose (paying income tax) or for medical purposes tax-free, a fully funded HSA is like a super-IRA.  It has all the tax benefits of a traditional IRA plus the ability to pay medical expenses tax-free.  (You won't get much growth if you stick to a bank's 0.0000% savings account interest, but many HSAs will allow you to invest part of your funds in mutual funds or other investments.)

[dmertz]

I agree, that statement doesn't make sense.  I can't imagine any situation where it wouldn't be beneficial to contribute to an HSA if one has the funds to do so, except for individuals who in all future years will never have an income tax liability greater than zero.