Deposit All You Can
in Your HSA
April 1, 2013
Vol. 9, Issue 4
You have until April 15 this year to deposit all the IRS allows in your HSA and claim the maximum tax deduction for your 2012 filing. If you have an individual HSA, you can deposit $3,100. If you have a family HSA, you can deposit $6,250. And, if you’re at least age 55, the IRS allows an additional $1,000 contribution. In this newsletter, I want to discuss why it’s important to deposit as much as you can so you have a large HSA balance when you need to use it. Let’s look at the limitations on doctors and the shortage of available doctors I expect will result from the Affordable Care Act.
I Expect Provider Networks to Shrink
PPO networks are going to shrink as a way to cut costs, as insurance companies deal with greater regulation and shrinking profit margins. With fewer doctors and hospitals in a health insurance policy’s network, your risk of needing an out-of-network provider increases. That means you’ll have to pay for bigger co-insurance charges to get care. If you have enough money (in your HSA), you will always be able to hire the doctors you need.
Having money in your HSA gives you some "health-care freedom," so that if the world specialist you want to see is not in your network, you still have options. Having money in an HSA gives you options, and puts you in charge of your health-care decisions. You won’t be subject to the dictates of insurance company bureaucrats or government administrators.
I Expect It Will Be Hard to Find a Doctor
There are likely to be doctor shortages and waiting lists for medical treatment. If there is for example a 17-week waiting list to see a specialist - as is often the case in Canada - you may have to travel a very long distance, even outside of the U.S., to get the health care you need in time. Over time you may be able to put enough money in your HSA so you and your family can easily survive such a catastrophe.
How Much You Can Save with a Fully-funded HSA
If you are in a 28-percent federal income tax bracket and a six-percent state income tax bracket and you make the maximum HSA contribution, here’s how to figure your savings. As an individual, multiply 34 percent by the 2012 maximum HSA contribution of $3,100 and you have $1,054. If you have a family HSA, multiply 34 percent by $6,250 for $2,125. That’s how much lower your tax bill will be on April 15th.
If your employer contributes to an HSA for you, you further save payroll taxes (Medicare, Federal Unemployment and Social Security). You may also be able to contribute pre-tax dollars through a payroll deferral HSA contribution.
How to File Tax Returns with an HSA
HSA contributions are tax deductible as an "above-the-line" deduction on line 25 of Form 1040. You get the benefit of the deduction even if you take the standard deduction and do not itemize. You must attach Form 8889 to the 1040 you file, and you can’t use form 1040EZ. If you use tax preparation software, it will take care of this for you.
HSA Contribution Limits for 2013
From the first of this year through April 15, 2014, you can make HSA deposits for the year 2013. Those limits are $3,250 for individuals and $6,450 for families. And, the additional $1,000 contribution will remain available to people who are at least age 55. Just remember that you cannot contribute to an HSA once you enroll in Medicare.