Hsa

[Openfire]

Sole prop client currently deducts employee and family medical insurance by employing his wife and providing medical for employees. Is there more of a tax advantage in using an HSA?

[Openfire]

*Note: The wife is the only employee, so the HSA would only be for his family.

[Bees Knees]

Keep in mind an HSA contribution is only allowed if the health insurance is a high deductible plan. The minimum annual deductible for a family plan in 2014 is $2,500, and the maximum annual deductible and out-of-pocket expense limit for a family plan in 2014 is $12,700.

Thus, if the health insurance falls into that range, you can make contributions to the HSA.

If that is the case, the sole prop is currently deducting 100% of the health insurance premiums, but the out-of-pocket expenses (costs not covered by insurance) go to Schedule A as medical expenses, subject to the new 10% AGI limitation.

Thus, the advantage of the HSA is that contributions are 100% tax deductible and can be used tax-free to pay for those out-of-pocket expenses that otherwise would be subject to the 10% AGI limit on Schedule A.

[DaveinTexas]

Hra

For sole props with only one employee, that being the sole prop's spouse, I like the HRA plan too.

See this recent post on the subject: http://forum.thetaxbook.com/showthre...-Sch-c-medical

Have a Merry Christmas!!!

[LCP]

Thus, the advantage of the HSA is that contributions are 100% tax deductible and can be used tax-free to pay for those out-of-pocket expenses that otherwise would be subject to the 10% AGI limit on Schedule A.

Further, HSA funds can be used to pay future eligible expenses for the rest of your life. (I bring this up all the time....for fear that someone will correct me).

[buzzardbreath]

No ignoring

Your point is made and is not lost among us, and yes lifetime use is an advantage, but only so far
as the funds last.

Most people over 50 unless they are in good health, could easily exhaust the $2500 in a year,
in fact for some people every year.

In fact, the lifetime advantage could best be used by a young person who wanted to invest in coverage
for later years. He (she) could open up an account at a young age when he is not using up the money,
and accumulate a tidy amount for use when older years come.

Until this past year, there was a $5000 annual limit, and why it got reduced by Obamacare to $2500
I'll never know. Maybe to raise revenue into federal coffers, or if not maybe someone can tell us.

[Gary2]

Until this past year, there was a $5000 annual limit, and why it got reduced by Obamacare to $2500
I'll never know. Maybe to raise revenue into federal coffers, or if not maybe someone can tell us.

This reduction in contribution limits applies to FSAs, not HSAs. As far as I know, the limits on HSA contributions did not go down, and I think went up a small amount for inflation.