How to Maximize Your
Tax Deductions Related to
October 1, 2012
Vol. 8, Issue 10
I hope you were able to make good use of some of the ideas about tax credits and tax deductions in our last issue. Since this is the final quarter of 2012, I’ll focus on four important points to help you increase your tax deductions for health care in this issue.
Fast Approaching Deadlines
If you don’t have an HSA-qualified health insurance plan yet, you need an effective date of no later than December 1 to get a tax write-off for 2012. And, at least one insurance company is pulling the plug on issuing HSA plans for the December 1 deadline at the Thanksgiving holiday.
You want to apply by Thanksgiving to be sure to make the deadline, and sooner than that if possible. And, since insurance companies still run applications through underwriting to assess health problems, you might have to apply more than once if you have health issues.
If you have your HSA-qualified plan and have not yet established your HSA, do so immediately. You can open your HSA with as little as $25. As long as that’s set up, you can retroactively reimburse yourself for HSA-qualified dental and health care expenses all the way back to when you opened the account. And, you can use tax-free HSA money to pay for other family members’ dental and medical expenses even if they are not on your health insurance policy.
Since there’s no time limit on how soon you need to reimburse yourself, you can let your account grow with tax-free earnings and pay yourself back later out of the earnings. Just keep your health care receipts for the IRS.
As long as your HSA is open,you’re covered for the unexpected. For instance, if you have a $2,000 emergency-room bill, you can run that money through your HSA and get a complete tax write-off on it. In other words, you could deposit $2,000 and immediately withdraw it to pay the bill. By moving it through the HSA, it becomes a tax-deductible expense and you don’t even need to itemize when you file.
My Choice for HSA Funds
HSA Bank is where I have my HSA money. It’s the most popular HSA administrator among our clients. And, it’s a particularly good choice if you want investment options even while your HSA balance is at beginning levels.
HSA Bank gives you thousands of different investment vehicles offered by TD Ameritrade Corporate Services. It also provides one free debit card for you and one for your spouse, along with free internet banking and online transfers.
If you want to get the maximum in tax deductions, you can contribute$3,100 to an individual HSA or $6,250 to family plan for 2012. If you’re at least 55, you can add an extra $1,000.
Extra Savings for Business Owners
If you own a business set up a Health Reimbursement Arrangement and your business can reimburse medical expenses, including health insurance premiums. Instead of taking a deduction for health insurance on form 1040, you can count it as a business expense on schedule C.
HRAs are available to C-corps, S-corps, and Schedule C sole proprietors whose spouse works for the business.And, you can reimburse your spouse for your own health care expenses since you are a member of her or his family. You can learn more about HRAsat our Section 105 HRA Plans For The Self-Employed web page.
If you have employees, other than your spouse, visit our 105 HRA Plans for Small Business Owners web page to see how to cut your health insurance costs in half. You can reimburse employees for individual health insurance premiums, which can cost less than half the price of group coverage.
Your personal advisor can answer questions about any of this. Paying for your health insurance and medical expenses through an HRA can save you $3,000 or more every year. In fact, we guarantee an HRA will save you money, or it won’t cost you a thing.
To your health and wealth!