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Use reimbursement money for another deposit?


Guest DanG
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Guest DanG

For 2010 my wife and I setup our first family HSA account. Instead of having withdrawals from our paycheck, we decided to make a couple of lump sum deposits for a total of $3,000. We planned to add more money as we needed it. We charged a few qualified medical expenses to our credit card that came to around $1,500 and have not reimbursed ourselves for this yet. Since we just had our first child, we are expecting more medical bills to arrive – probably another $2,500 or so. To pay for this we are going to have to add more money to our HSA acct.

So my question is, do we reimburse ourselves the $1500 and then use that money to make another deposit to our HSA account to pay the future bills? It seems odd that we are going to withdrawal the money and then deposit it back again. Then again maybe that is what the IRS needs to see for tax purposes.

Thanks. DanG

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It depends on your situation. Hate to add to my response, but you might be interested in the first scenario, or some version of it.

Let's assume you do not need the money from your HSA to pay your medical bills. You can fund your HSA, to the maximum, yearly and take the tax deduction along with the tax favored treatment of gains within the account. As your HSA fund grows, it will allow you to purchase larger deductible plans, which in turn have a smaller premium. Additionally, you can use this fund at age 65+ as another source of retirement income. I realize this is an unrealistic scenario for many people, but it might fit your situation.

On the other hand, let's assume you do need the money from your HSA to pay your bills. Let's assuming; 1) you have family coverage, 2) you have deposited $3,000 out of a maximum of $6,150, and 3) your expected total claim cost for 2010 is $4,000.

At the very least, you should fund the expected claim cost ($4,000) so that you can get the tax advantage. You can take it out of your HSA account or from another source, it's up to you.

Hope this helps.

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