Health Savings Accounts (HSAs)

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search


Introduction

A Health Savings Account (HSA) is a tax-exempt trust or custodial account set up with a qualified HSA trustee (a qualified HSA trustee can be a bank, and insurance company, or anyone already approved by the IRS to be a trustee of IRAs or Archer MSAs) in which money is saved exclusively for future medical expenses. This account must be used in conjunction with a High Deductible Health Plan (HDHP).


HSA LImits

Contribution limit HDHP min deductible Maximum OOP
Year Self-only Family Self-only Family Self-only Family Source
2011 $3,050 $6,150 $1,200 $2,400 $5,950 $11,900 Rev. Proc. 2010-22
2010 3,050 6,150 1,200 1,200 5,950 11,900 Rev. Proc. 2009-29
2009 3,000 5,950 1,150 2,300 5,800 11,600 Rev. Proc. 2008-29
2008 2,900 5,800 1,100 2,200 5,600 11,200 Rev. Proc. 2007-36
2007 2,850 5,650 1,100 2,200 5,500 11,000 Rev. Proc. 2006-53
Rev. Proc. 2007-36
2006* 2,700 5,450 1,050 2,100 5,250 10,500 Rev. Proc. 2005-70
2005* 2,650 5,250 1,000 2,000 5,100 10,200 Rev. Proc. 2004-71


*Until the Tax Relief and Health Care Act of 2006 (HR 6111), PL-109-432, as implemented through Rev. Proc. 2007-36, the actual contribution limit was the lower of the actual deductible or the amount shown above, and the limit applied monthly at 1/2 of the annual limit.


HSA Overview

What are the Benefits of a Health Savings Account?

  • You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040.
  • Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
  • The contributions remain in your account from year to year until you use them.
  • The interest or other earnings on the assets in the account are tax free.
  • Distributions may be tax free if you pay qualified medical expenses.
  • An HSA is “portable” so it stays with you if you change employers or leave the work force.


Qualifying for a Health Savings Account

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

  • You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
  • You have no other health coverage except what is permitted under Other health coverage, later.
  • You are not enrolled in Medicare.
  • You cannot be claimed as a dependent on someone else’s 2009 tax return.


High Deductible Health Plan (HDHP)

A High Deductible Health Plan has:

  • A higher annual deductible than typical health plans, and
  • A maximum limit on the sum of the deductible and the annual out-of-pocket medical expenses that must be paid for covered expenses. Out-of-pocket expenses include copayments and other amounts, but do not include premiums.

Source: IRS Publication 969


Additional guidance


Lacerte Input

The following explains how to enter most common HSA situations in the Lacerte Tax program, and was last updated September 2006.

All entries should be made in the entry screen titled HSA/MSA (screen number 32.1).

Contributions

  1. Enter the type of coverage (self-only or family) for the taxpayer and/or spouse in the first line (the boxes in the image below containing the numbers 3 or 53).
  2. Enter the amount contributed in the boxes below containing the numbers 5 or 55.
  3. Enter the annual deductible in the boxes below containing the numbers 6/8 or 56/58.
Image:HSA-Lacerte_1.jpg

Distributions

  1. Enter the amount distributed in the boxes below containing the numbers 15 or 65.
  2. Enter the qualified expenses in the boxes below containing the numbers 17 or 67.
Image:HSA-Lacerte_2.jpg

Is some rare cases, the limitation may need to be overridden. An example would be if the deductible changed mid-year.

Personal tools