HSA

[georgiabulldogs111]

For some of the year, I did not have money in my hsa account & so I paid some health expenses out of pocket, with after tax money.  It was about $2500, is there no way to claim that somehow?  I do 1040 & don't itemize, since they raised the standard deduction a few years back.

Thanks for any responses 

[xmasbaby0]

Sorry---if you do not itemize deductions there is not a way to recover the money you spent out of pocket on medical expenses via your tax return.   It is very hard to use the deduction for medical expenses even if you itemize because you can only use the out of pocket amount that is OVER 7.5% of your AGI.

[georgiabulldogs111]

Ok, that is how it seemed to be, based on what I could find.  So I have some from each paycheck put into my hsa (pretax, of course)  So the only way to get the pretax benefit is via payroll deduction?  If I transferred $2000 of after tax money into the hsa, can I claim that somewhere?

[Opus 17 · Accepted solution]

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@georgiabulldogs111 wrote:

Ok, that is how it seemed to be, based on what I could find.  So I have some from each paycheck put into my hsa (pretax, of course)  So the only way to get the pretax benefit is via payroll deduction?  If I transferred $2000 of after tax money into the hsa, can I claim that somewhere?

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I'm afraid @xmasbaby0 missed the importance of the HSA account here.

The key fact is that the HSA can only be used to reimburse expenses that were incurred after the account was opened.  As long as that condition is met, you can reimburse yourself after the fact and at any time you like when there are funds in the account.  You are also allowed to make contributions of out-of-pocket funds, up to your annual maximum, of course.  If you are not contributing the maximum through payroll, you can add out of pocket contribution by making a deposit directly to the HSA bank, probably via the same linked bank account you use to get your reimbursement.

That means it is possible to make a deposit, then reimburse yourself for some past expense as soon as the money is credited to your account, and take a tax deduction for the amount of the deposit.

Remember that the contribution maximum for 2021 is $3650 if you are covered by a single HDHP, and $7100 if you are covered by a family HDHP.  Also, you can make a contribution for the 2021 year as late as April 15, 2022 (the tax filing deadline); but be aware that there will be some procedure to follow to notify the bank before you make the deposit that the incoming deposit is for 2021 and not 2022.

So yes, you can make a deposit to your HSA now for 2021 (if the bank is properly notified, and up to your annual maximum) and then withdraw it in a few days to reimburse yourself, and you will claim the tax deduction on your tax return.  In Turbotax, contributions by payroll deduction (including your funds and any employer funds) are reported on your W-2 only.  Later in the program it will ask for out of pocket contributions, that's where you will enter your additional contributions but don't enter your payroll deductions again.

[rjs]

@Opus 17 

If I understand correctly, while an HSA contribution for 2021 can be made until April 15, 2022, any distribution from the HSA has to be reported in the year it is actually made. You can't take a distribution in 2022 and designate it as a 2021 distribution. Am I right about that?

So @georgiabulldogs111 can report the 2021 HSA contribution, and get the deduction for it, on her 2021 tax return. And she can reimburse herself from the HSA in 2022 for an expense she paid in 2021, but it will be a 2022 distribution. It will be on her 1099-SA for 2022, not her 2021 1099-SA, and she will have to report the distribution on her 2022 tax return, not her 2021 tax return. As long as she used the distribution for qualified medical expenses, it will not affect her 2022 tax, but she will have to report it on her 2022 tax return because it will be on her 2022 1099-SA.

[Opus 17]

@rjs 

Of course, but it’s irrelevant. Distributions are never taxable as long as they are used for qualified medical expenses. No matter when the taxpayer gets the 1099-SA, they will enter it in TurboTax and then check the box that says “yes, I used all the reimbursement for qualified medical expenses.“. There is no requirement that a medical expense incurred in 2021 be reimbursed in any particular year, only that the expense must have been incurred after the HSA was opened to be reimbursable.

[Mike9241]

In order for a medical expense to be eligible for reimbursement from a Health Savings Account (HSA), the expense must have been incurred after the opening of your HSA account. So, for example, suppose you opened an HSA account on 1/1/2021 and funded it with $100. You paid the $2,500 with funds outside the HSA. In January 2022, you contributed $3,000 to your HSA account. Then you request an HSA reimbursement for the $2,5000 incurred in 2021. This is allowed.