How Do I Claim The Federal Tax Deduction For My HSA Contribution?
As the year begins comes to a close it is once again time to think about taxes. If you are enrolled in a High Deductible Health Plan and have not opened or funded a Health Savings Account now is the time to investigate it. The HSA federal tax deduction can be especially useful to those who do not itemize but have expensive medical bills.
What You Need To Know About HSA’s And Federal Tax Deductions
For 2010 maximum contributions into a HSA are $3,050 for an individual and $6,150 for family coverage. Those ages 55 and older can contribute an extra $1,000. Funds in the account grow tax deferred and if spent on qualifying medical expense can be withdrawn tax free. You have until December 1st to open an HSA to claim it on this year’s taxes. You can make contributions up until April 15, 2010 and include them for a federal tax deduction.
An HSA can reduce your taxes in several ways depending on the manner of funding. If you and/or your employer make contributions to your HSA with pre-tax dollars these contributions will be excluded from your income. This reduces your earned income possibly making you eligible for other federal tax deductions. If pre-tax deductions or rollovers are your only funding source(s) you aren’t eligible to take the federal tax deduction on 1040 line 25.
If you make post-tax contributions these are eligible for the deduction on your 1040 line 25. You need to fill out form 8889 to determine the amount of your credit. It is possible to get up to a $6,150 deduction if all contributions are done post-tax. By taking this credit you will be able to reduce your adjusted gross income possibly enabling you to take other federal tax deductions. .