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Alright, if I understand you correctly, you're essentially using the HSA kind of like a Roth IRA, except that 1. Money contributed is tax free 2. There is a
by kxyvr 7y ago
Alright, if I understand you correctly, you're essentially using the HSA kind of like a Roth IRA, except that
1. Money contributed is tax free
2. There is a $3.5k contribution limit
3. Money can be withdraw tax free prior to 65, at any time, as long as there's a receipt for the qualifying medical expense that occurs after the HSA was established
Then, from what I can tell, the drawback to this approach is that there needs to be enough cash flow to cover for medical expenses. Certainly, money could be withdrawn from the HSA, but the real tax benefit comes from pretax contributions and that capital gains, interest, and dividends are tax free. Overtime these can provide a huge amount of savings, but they need time to develop. Sound about right?
- lotsofpulp 7y agoCorrect. There's a higher contribution limit ($7k in 2019) if you have family HDHP coverage. Also, after retirement, money can be withdrawn without paying the 10% penalty and just paying the regular income tax, in case you don't have receipts for medical payments from the past. I wonder how the IRS would prevent a tax evader using the same receipts for payments for medical expenses for different withdrawals in different years.
- ixwt 7y agoI would assume if you got audited, you would have to justify all withdraws. I doubt they would be impressed with multiple copies of the same receipt.
- lotsofpulp 7y agoHow many years do you get audited for? I thought it was just 7. So if you use it every decade, I presume they’re not going through every year and it wouldn’t be seen. Unless they’re keeping a database.