Solved: My wife's medical expenses exceeded 10% of her AGI but not our combined AGI. We are planning on MFS, but some of the medical was paid by my HSA. How do we file this?
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New Member

My wife's medical expenses exceeded 10% of her AGI but not our combined AGI. We are planning on MFS, but some of the medical was paid by my HSA. How do we file this?

Do I file the total amount I paid out via HSA on my return and put the total-HSA payments on her return?

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Level 13

My wife's medical expenses exceeded 10% of her AGI but not our combined AGI. We are planning on MFS, but some of the medical was paid by my HSA. How do we file this?

First, the floor for medical expenses for 2017 is now 7.5% for everyone - that was a very recent change (December 2017).

The amounts paid with tax-free HSA are not deductible on Schedule A.

TurboTax gives you two ways to report medical expenses:

1. Report all expenses (including the ones covered by your HSA distributions) and then report the insurance reimbursements (non-HSA) at the end of the Medical interview, so that your medical expenses will be netted out properly (note that the HSA distributions from your 1099-SA will be carried automatically against the listed medical expenses which is why you would have to list the expenses paid with HSA dollars).

2. Just enter any net amount of medical expenses paid with AFTER-TAX money (i.e., do NOT include the HSA distributions).

Because the program is going to carry the HSA distributions automatically to Medical expenses, if you think that you will actually report medical expenses with AFTER-TAX dollars over the 7.5% floor, I think you should do option #1. Report all medical expenses, whether paid with after-tax dollars, reimbursed by insurance, or paid with the HSA.

But note that if you are filing MFS, that if your spouse itemizes, then you cannot take the standard deduction but you must also itemize, even if the amount you list is less than the standard deduction. This means that you will have to run your return both ways (MFS and MFJ) because the resulting hit on your taxes may not be worth whatever benefit she receives from the medical expenses - especially now that you know that HSA distributions are not deductible on Schedule A.

Furthermore, taxpayers who file MFS are not eligible for certain other deductions and credits, such as Education Credits, the Earned Income Credit, and the Child and Dependent Care Credit.

Do not be surprised if filing MFS may not save you anything in taxes, especially if you are in a community property state or have children.

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3 Replies
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Level 15

My wife's medical expenses exceeded 10% of her AGI but not our combined AGI. We are planning on MFS, but some of the medical was paid by my HSA. How do we file this?

MFS might not work, since you both have to itemize. Are you in a Community Property State?
and it's now 7.5% of AGI, not 10%.
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New Member

My wife's medical expenses exceeded 10% of her AGI but not our combined AGI. We are planning on MFS, but some of the medical was paid by my HSA. How do we file this?

I'll have to go read up on how community property will effect this (we are in CA).  Thanks for the tip!
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Level 13

My wife's medical expenses exceeded 10% of her AGI but not our combined AGI. We are planning on MFS, but some of the medical was paid by my HSA. How do we file this?

First, the floor for medical expenses for 2017 is now 7.5% for everyone - that was a very recent change (December 2017).

The amounts paid with tax-free HSA are not deductible on Schedule A.

TurboTax gives you two ways to report medical expenses:

1. Report all expenses (including the ones covered by your HSA distributions) and then report the insurance reimbursements (non-HSA) at the end of the Medical interview, so that your medical expenses will be netted out properly (note that the HSA distributions from your 1099-SA will be carried automatically against the listed medical expenses which is why you would have to list the expenses paid with HSA dollars).

2. Just enter any net amount of medical expenses paid with AFTER-TAX money (i.e., do NOT include the HSA distributions).

Because the program is going to carry the HSA distributions automatically to Medical expenses, if you think that you will actually report medical expenses with AFTER-TAX dollars over the 7.5% floor, I think you should do option #1. Report all medical expenses, whether paid with after-tax dollars, reimbursed by insurance, or paid with the HSA.

But note that if you are filing MFS, that if your spouse itemizes, then you cannot take the standard deduction but you must also itemize, even if the amount you list is less than the standard deduction. This means that you will have to run your return both ways (MFS and MFJ) because the resulting hit on your taxes may not be worth whatever benefit she receives from the medical expenses - especially now that you know that HSA distributions are not deductible on Schedule A.

Furthermore, taxpayers who file MFS are not eligible for certain other deductions and credits, such as Education Credits, the Earned Income Credit, and the Child and Dependent Care Credit.

Do not be surprised if filing MFS may not save you anything in taxes, especially if you are in a community property state or have children.

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