Using HSA Funds to Pay LTCI Premiums?

Sep 6, 2016

  1. Brian Anderson
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  2. Mr_Ed
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    If someone is self-employed or has a partnership or an S-corp they are better off using the "self-employed health insurance deduction" rather than using their HSA.
     
    Mr_Ed, Sep 6, 2016
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  3. rbrewer
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    rbrewer Super Genius

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    If you are a sole proprietorship can you use the health insurance deduction?
     
    rbrewer, Sep 6, 2016
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  4. junkman
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    It isn't a straight Schedule C deduction but you get a little benefit. Lots of information available.

    Every benefits agency I know adapted HSAs when they 1st came out. It's sort of like a fully insured self-funded plan with the spec set at whatever your out of pocket is and includes the ability to fund claims as incurred.

    As to the comment that taking the self employed health ins deduction, take all you can. An HSA doesn't preclude taking the premium deduction for the premium portion. HSAs have come out ahead every time I've run the numbers when the insured is responsible for a large portion of the premium.

    Re: LTC premium, there is the underwriting issue that comes up when a prospect is old enough to care about LTC. But that part of the law is another sweet benefit of the HSA law.
     
    junkman, Sep 6, 2016
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  5. rbrewer
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    rbrewer Super Genius

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    Sorry misunderstanding? I'm trying to figure out if...
    1. Use my husbands HSA to pay long term care premium or
    2. Use healthcare deduction as a sole proprietorship with my business?

    Thank you...
     
    rbrewer, Sep 6, 2016
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  6. ARus
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    HSA are tax deferred money, so you can deduct them when filing taxes as proprietorship. You don't need to turn it through your company/dba. If it is from your husband's HSA, I believe it is same: HSA money aren't taxable.
     
    ARus, Sep 6, 2016
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  7. Mr_Ed
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    If you (or your spouse) are self-employed you cannot deduct your medical insurance premium or your LTCi premium from your schedule C. Those premiums have to be deducted on the front of form 1040 under the "self employed health insurance" deduction.

    You should NOT use your HSA to pay for your LTCi premiums.
    You should NOT use your HSA to pay for your medical insurance premiums.

    Why? Because both LTCi and medical insurance premiums are already "pre-tax" because they come right off the top of your income since you're self-employed.
     
    Mr_Ed, Sep 6, 2016
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  8. junkman
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    For clarity, since you can not take the health premium as a deduction, you end up paying both sides of the Medicare and Social Insecurity taxes on the money earned which is ~ 15%. You do avoid federal and state income tax.

    Off hand, the only way to not pay any tax on health premiums is to work for a C corp and put in a 125 plan which is easy to do.

    [hijack] I'd be happy to pay the tax if I could find a way around the 62% rate increase that is likely 1/1 on my individual off exchange premium[/thread hijack}
     
    junkman, Sep 8, 2016
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