Can I Use Hsa to Pay Insurance Premiums
Can I Pay My Insurance Premiums From My HSA?
A express corporeality of long-term intendance premiums can be paid from HSAs.
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Health savings accounts offer taxation benefits for saving for hereafter wellness costs. However, not all medical insurance premiums are allowed as qualified expenses when you lot take withdrawals. If you lot have money out and use it on non-qualified premiums, you're going to be on the hook for extra taxes and penalties on the distribution.
Qualified Premiums
Simply certain insurance premiums count as qualified expenses from your HSA. Eligible premiums include long-term care insurance, continuation insurance such every bit COBRA, wellness care while y'all're receiving unemployment under state or federal law, and Medicare coverage after you plow 65. When you take distributions to pay these costs, like any other qualified expense, the money comes out tax-free and penalty-costless from your HSA.
Limits on Qualified Premiums
The long-term care insurance premiums you tin can count as qualified expenses are limited based on the age of the beneficiary. For case, if the beneficiary is under twoscore at the terminate of 2012, you tin can only count up to $350 equally a qualified expense. Payments for standing insurance and insurance while you're unemployed are qualified, and that includes premiums you pay for your spouse and your dependents. Yet, if you're under 65, y'all tin't use your HSA to pay for your spouse'south Medicare even if your spouse is over 65.
Not-Qualified Expenses
Yous tin take coin out of your HSA for other insurance premiums, but those withdrawals count equally nonqualified withdrawals. Equally a outcome, you have to pay taxes and a 20 percent penalty on the withdrawal. There are limited exceptions from the penalty, such as if you lot're permanently disabled, over 65 years old or taking distributions equally a casher, merely those won't be taxation-free -- only penalisation-gratis.
Tax Reporting
Whether your insurance premiums qualify or not, you nonetheless have to report the distribution on your taxes. If y'all spend the coin on qualified insurance premiums, report the withdrawal on Form 8889. If it's not qualified, you lot must also effigy the 20 percent early withdrawal penalty on Grade 8889 and include the distribution on line 21 of Form 1040 equally taxable income. It'due south taxed just like other ordinary income -- the higher your tax subclass, the more you lot pay.
References
Writer Bio
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."
Source: https://finance.zacks.com/can-pay-insurance-premiums-hsa-7123.html
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