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If you contribute to an HSA, you may be able to deduct those payments from your total taxable income in 2018.

Unlike regular medical expenses (which you don’t get to claim if you take the standard deduction), HSA contributions are taken as an adjustment to your income. Even if you take the standard deduction, HSA contributions could help you to reduce your income. With less taxable income, you’ll have less tax to pay on your tax return. Even better, the distributions from an HSA can be tax-free as well.

Of course, as with all things tax-related, there are restrictions.

In order to qualify for an HSA, you must first meet the requirements:

  • You must be covered under a high deductible health plan on the first day of the month.
  • You cannot have other health coverage (though there are some exceptions)
  • You cannot be enrolled in Medicare.
  • You cannot be someone else’s dependent on their 2018 tax return.

There are also limits on how much you can contribute in a tax year. For self-only High Deductible Health Plan coverage, you can contribute up to $3,450 in 2018. For family High Deductible Health Plan coverage, you can contribute up to $6,900 in 2018. If you somehow contribute more than this amount, the over-payment will be subject to a 6% excise tax until you remove the over-payment.

This is only a general overview of HSA contributions. For more detailed information about HSA contributions or other financial planning questions, schedule a Pro-Advisor meeting with us today! Visit our website at https://www.clergytaxnet.com/resources/proadvisor/

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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