Health Savings Account: Time to Begin 2019 Planning

Did you know Health Savings Accounts should be on your mind this month?

Changes In Health Savings Accounts: Plan Ahead

There is a reason Health Savings Accounts should be on your mind at this time.  And that reason is that the Internal Revenue Service has recently announced inflation-adjusted figures.  This relates to the annual contribution limits for Health Savings Accounts.  And it will apply for the calendar year 2019.

Our clients at A.P. Accounting & Tax Services should be able to plan for at least 2 years in advance.  And we want to provide our clients with information that will make this task easier.  The reason is that what you do this month will affect what you have next year.  And therefore, it will also affect what will occur the following year.

So let’s examine Health Savings Accounts and recent rulings by the IRS.

Tax Planning for 2019 Health Savings Account: Especially For Those Tax Payers Who Plan Ahead.

Likewise, they issued two more important pieces of information for your Health Savings Accounts plans:

1.  The minimum deductible amounts.
2.  And maximum out-of-pocket expense amounts for high-deductible health plans.
3.  You can see the IRS publication of these facts and figures at this informative online IRS resource.

A.P. Accounting & Tax Services Breaks Down the Latest HSA Info

Under Sec. 223 of the tax code, the IRS permits you a deduction if you participate in a high-deductible health plan.  This is also called an HDHP.  A.P. Accounting & Tax Services wants you to understand and take advantage of this.  You are permitted this deduction for contributions to Health Savings Accounts.  These accounts are arranged to help pay your medical expenses.

IRS Issues HSA Contribution Limits for 2019

We also want you to be aware that the contribution deduction limit will be subject to an annual inflation adjustment.

Thus, in 2019, the annual limit on deductible contributions to your HSA is $3,500 for individuals with self-only coverage.  That’s a $50 increase from 2018.  If you have a family HSA, then you are allowed $7,000 for family coverage.  You will be getting a $100 increase from 2018.  $50 or $100 might not seem like much.  But every little bit helps when you are aware of tax-planning.

The New Health Savings Accounts Figures Show Progress in Taxpayer’s Favor

The IRS had recently announced that the “2018 limit for family coverage is $6900.”

However, the new number of 7,000 was reached.  This was after the IRS re-calculated the amount under the new inflation adjustment of the Tax Cuts and Jobs Act of 2017.  “And then granted relief for the retroactive change.”  If you are curious about the old coverage, you can visit this reliable resource to get all the details.

Are You Eligible To Contribute to an HSA?

Are you eligible for a Health Plan?  Check with  A.P. Accounting & Tax Service today.  An important point about your Health Savings Account Identity is that in order to contribute to an HSA, you must participate in an HDHP.

An HDHP is a health plan with an annual deductible that is not less than a certain limit each year…

Also, it is a health plan “for which the annual out-of-pocket expenses, including deductibles, co-payments, and other amounts, but excluding premiums, do not exceed a certain limit each year (Sec. 223(c).”

Specifically, according to government sources, “The IRS defines a high deductible health plan (HDHP) as any plan with a deductible of at least $1,350 for an individual or $2700 for a family.

Important:  Know Your Limits

On the other end of the spectrum, the government declares that an HDHP’s total yearly out-of-pocket expenses can’t be more than $6,650 for an individual or $13,300 for a family.  This expenditure includes:

• Deductibles.
• Copayments.
• And coinsurance.

(However, This limit doesn’t apply to out-of-network services.)

If you need to understand whether you qualify or not, then go to the online resource linked in the sentence below.  There you can read all the introductory material on the Health Savings Account from the Internal Revenue Service.

The limits on annual deductibles are also subject to annual inflation adjustments.

• For 2019, the lower limit on the annual deductible for an HDHP is $1,350.  This is for self-only coverage and $2,700 for family coverage.  However, be aware that the IRS did not change either of these figures for 2019.
• The upper limit for out-of-pocket expenses is $6,750 for self-only coverage.  And it is $13,500 for family coverage.  The IRS increased both of these from 2018, for 2019.

A Little Backstory on Health Savings Accounts

Below are four major programs that give individuals tax advantages to offset healthcare costs:

1.  Health Savings Accounts (HSAs).
2.  Medical Savings Accounts (Archer MSAs and Medicare Advantage MSAs).
3.  Health Flexible Spending Arrangements (FSAs).
4.  Health Reimbursement Arrangements (HRAs).

Each of these programs comes with certain rules and regulations:

1.  The Health Savings Account:  What You Need To Know.

A.P. Accounting & Tax Services wants you to understand this rule.  “An HSA may receive contributions from an eligible individual or any other person.”  This includes “an employer or a family member, on behalf of an eligible individual.”

• Contributions, other than employer contributions, are deductible on the eligible individual’s return.  (It does not matter if you itemize the deductions.)
• The IRS does not tax the Employer contributions as your income.
• Likewise, the IRS will not tax dollar distributions from an HSA to pay qualified medical expenses.

2.  The Archer Medical Savings Account:  (an MSA)

This type of account is for medical savings.  And it is permitted to receive contributions from an eligible individual and his or her employer.  However, here’s the catch.  They may not both contribute in the same year.

• Contributions by the individual are deductible and it does not matter if the individual itemizes deductions.
• Employer contributions aren’t included in income.
• Distributions from an Archer MSA that are used to pay qualified medical expenses aren’t taxed.

3.  The Medicare Advantage MSA:

This type of medical savings account is an MSA labeled by Medicare.  It is to be used to pay the qualified medical expenses of the account holder.

• First, the account holder must be enrolled in Medicare.
• Contributions can be made only by Medicare because that is the purpose of this account.
• Lastly, like other types of Health Savings Accounts, the contributions aren’t included in your income.  If you use MSA dollars to pay qualified medical expenses, they won’t be taxed.

HEALTH FSA AND HRA

4.  A health FSA:

This type of health savings account is permitted to receive contributions from an eligible individual.  Likewise, the IRS permits employers to contribute.

• Once again, FSA Contributions aren’t includible in income.
• And of course, the IRS will not tax you for reimbursements from an FSA that are used to pay qualified medical expenses.

5.   The HRA:  This type of account is set up for contributions from the employer only.

• Remember, employees never contribute to this type of Health Savings Account.  However, like the other HSAs above, contributions aren’t included in income.
• Also, similar to other accounts above, the IRS will not tax HRA dollars that are reimbursements for your medical costs.  This assumes that you use those dollars to pay qualified medical expenses.

The employer funds the plan.  Any distributions are considered tax deductible.  But only to the employer.  And finally, the government won’t tax reimbursement dollars received by the employee for genuine healthcare services.

The owners and staff of A.P. Accounting & Tax Services And a Safe Memorial Day

A.P. Accounting and Tax Service wish you a happy, healthy and safe Memorial Day Weekend.  It is the official opening of the summer season.  We hope you enjoy it with family, friends and outdoor activities that refresh the mind, invigorate the body and delight the spirit.

The words from Ronald Regan’s 1986 Memorial Day Speech remind us of the special pride we feel to be an American.  We hope it will put you, as it does us, in the spirit of the Memorial Day Holiday.

President Ronald Regan’s 1986 Memorial Day Address (excerpts) at Arlington National Cemetary

Here in Arlington rests a sharecropper’s son who became a hero to a lonely people.  Joe Louis came from nowhere. But he knew how to fight.  And he galvanized a nation in the days after Pearl Harbor.  He put on the uniform of his country and said, “I know we’ll win because we’re on God’s side.”

Audie Murphy is here. Audie Murphy of the wild, wild courage. For what else would you call it when a man bounds to the top of a disabled tank, stops an enemy advance, saves lives, and rallies his men. And all of it single-handedly. When he radioed for artillery support and was asked how close the enemy was to his position. He said, “Wait a minute and I’ll let you speak to them.”

Oliver Wendell Holmes is here. Holmes served in the Civil War…  He wrote, “At the grave of a hero we end, not with sorrow at the inevitable loss, but with the contagion of his courage; and with a kind of desperate joy we go back to the fight.”

All of these men were different, but they shared this in common: They loved America very much. There was nothing they wouldn’t do for her…
And we owe them something, those boys. We owe them first a promise: That just as they did not forget their missing comrades, neither, ever, will we.