Not enough money in my HSA account to get reimbursed for this year's medical expenses.

[sergio-trejos11]

This year my total medical expenses came out to about $5000. All paid with my debit card. I only have $700 in my HSA account currently and wanted to reimburse myself. What is the best way to get the best Tax deduction in this case? Should I:

- Contribute $4300 to my HSA and then reimburse myself for $5000?

- Reimburse myself for $700?

- Don't do anything and try itemize all medical expenses on my tax return (I realize I can only deduct medical expenses that exceeds 10% of my AGI but I am not sure what my AGI will be this year).

- Any other suggestion?

Thanks!

[TaxGuyBill]

The first option would be the best tax outcome, *IF* it is allowable.

Do you still have a High Deductible Health Plan (HDHP), so that you are eligible to contribute to the HSA?  The maximum amount you can contribute depends if you have a 'family' HDHP or if it only covers you, and your age.  If you are not sure about the maximum amount you can contribute, please let us know (1) if your health insurance qualifies as a HDHP, (2) if it is a 'family' plan, and (3) your age.

[Opus 17]

1. First, you have to determine if you are allowed to contribute to an HSA.  You must have a qualifying HDHP plan for at least part of the year, and no other "insurance" (including an FSA or other insurance coverage) except what is allowed in publication 502 (certain types of accident only plans, and plans that cover vision and dental only).

2. Then you need to determine your contribution limit for 2017.  If you have qualifying HDHP insurance now and plan to have it through the end of 2018, you can use the last month rule to use the maximum contribution.  If you had qualifying HDHP insurance for part of the year, you have to pro-rate the amount.

The maximum contribution amount for 2017 if you are covered by self only insurance is $3400, or $4400 if you are 55 years old or older.  The maximum contribution amount if you are covered by a family insurance plan is $6750 or $7750 if you are 55 or older.  If you are married, you and your spouse have a combined maximum of $6750 that can be split any way you want.

And as noted, if you had qualifying coverage for only part of the year, then you have to pro-rate the contribution limit.

If you already made some contributions, you can figure your remaining allowable amount.

3. Then you have to make sure that the care occurred after the HSA was opened, even if the care occurred before the deposit was made.

4. If you have room under your contribution limit for the year, you can deposit up to your contribution limit (resulting in a tax deduction) and then withdraw the money a few days later and pay for care.

You also don't have to pay for the care from the HSA, you can pay from your own funds and then reimburse yourself

So the bottom line is that if you qualify to make contributions, you can "wash" your money through the account (up to your limit this year), pay yourself back, and get the tax deduction.  That will be much more effective than the itemized tax deduction.  If you are under single coverage and your limit is $3400 this year, you can wash up to $3400 through the account this year and another $1600 after January 1.  (Or $900 plus withdraw the rest, or contribute more if you want the account to accumulate for the next emergency).

[sergio-trejos11]

Thank you for your in depth response. I do have my family covered and will take notes in mind.