Even if you do not itemize your tax deductions on Schedule A 1040, you can claim a tax deduction for contributions you make to your Health Savings Account (HSA).
When most people think of an HSA they think about a high deductible health insurance plan and using the HSA to fund for unreimbursed qualified medical expenses, like deductibles and copays. The problem is people are missing literally hundreds of other qualified medical expenses they could fund for through their HSA.
If you are enrolled in a Qualified High Deductible Health Plan, below are a few of the more common expenses you can fund through your Health Savings Account:
- Vision Expenses – Such as Laser Eye Surgery, Eye Glasses, Contact Lenses, Eye Doctor Appointments and Eye Drops.
- Dental Expenses – Non-cosmetic dental treatments such as cleanings, extractions, medically necessary orthodontia, crowns, dentures, filings and x-rays.
- Hearing Aids
- Drug & Alcohol Addiction Treatment
It’s Your Money
Unlike a Flexible Spending Account (FSA) with the use it or lose it clause, the funds you deposit in your Health Savings Account is your money. Just like a savings or checking account, the money in your HSA is there until you use it, however it must be used for IRS approved qualified medical expenses.
What Are the Health Savings Account Contribution Limits for 2017?
Individual Health Coverage = $3,400
Family Health Coverage = $6,750
When Do I Get the Deduction?
The deduction applies when you make a contribution to your Health Savings Account. For example, if you happen to fund $2,000 in a particular year to your HSA but only use $1,000 towards qualified expenses, you still get the $2,000 tax deduction. Many people will overfund their HSA for 2 reasons: (1) – To prepare for future unreimbursed medical expenses and (2) – For tax purposes to get a bigger tax deduction.
Example of Money Lost:
In New York, most health insurance plans do not cover any adult vision expenses. If you needed to purchase eye glasses this past year, between the examination and the eye glasses you probably spent in the vicinity of $500.
Rather than simply paying out of pocket, you could have put the $500 into your HSA checking account and received a tax deduction for $500.
Business Owners Should Seek Tax Advice Before Funding Their Health Savings Account
It is particularly important if you own a business to consult your accountant when making contributions. There are various rules that affect contributions depending on how your business is structured. Please note it is not our position to give tax or legal advice.
Complete List of Qualified Medical Expenses
IRS Pub. 502, contains the complete list of qualified medical expenses. Click on the link below. The list of qualified expenses starts on page 5.
As always, please feel free to contact me if you have any questions.