When you contribute to a health savings account (HSA), you must use Form 5498-SA to report those contributions. This form will also report any nonqualified medical expenses. It is essential to keep track of all medical costs, even those you don’t consider medical.
After-tax contributions
An employee makes contributions to the health savings account (HSA). These donations are listed on Form 5498-SA, a report of gifts made in previous years during the current fiscal year. IRS regulations allow for this.
These contributions will not appear on your W-2 but may qualify for a tax deduction on line 13 of your taxable income. Keep your Form 5498-SA with your other tax documents. Contact your tax advisor before making changes. You can change your account up to six months after the end of the applicable tax year.
You must distribute these forms to your plan beneficiaries by May 31. In addition, you must make sure the information on the record is accurate and complete.
Contributions to a health savings account
Contributions to a health savings account (HSA) are a great way to save money for your health care costs. These accounts are tax-free and can be used for qualified medical expenses. HDHP enrollees can contribute up to $3,650 per year for self-only coverage and $7,300 per year for family coverage. Roll over your contributions yearly, and earn interest.
Healthcare costs are escalating, and the average employee contribution is accelerating. As a result, more Americans are spending out-of-pocket to cover medical expenses. The average employee contribution to their HSA is now $2,034. In the past year, the average donation was $1,872 per employee. In addition, more organizations are incentivizing employees to participate in wellness programs to “earn” their employer HSA contributions.
Depending on your employer, HSA contributions may be tax-deductible. In addition, HSA contributions can be made through payroll deductions. Contact your employer to find out if they offer HSA payroll deductions and ask about their plans. Other methods of contributing to an HSA include online bill pay and HSA Bank. The HSA bank also allows users to link external bank accounts to make contributions online. After confirming the amount, HSA Bank deposits the funds into your account.
Distributions from an HSA
When withdrawing from your HSA, you must declare the distribution in your tax return. If you don’t, you will be taxed on the amount. You can get a tax-free distribution using the funds for qualifying medical expenses. But you must use them within the current year. And you must provide documentation for the expense.
The HSA can be distributed in five distinct ways. The normal distribution is the first one. The most typical and frequent HSA usage is this. However, it also includes medical services and items you frequently use, such as bandages, doctor’s visits, and hospital stays. Finally, there’s another type of distribution called an excess contribution distribution. This distribution is used when you use your HSA funds for medical expenses that aren’t covered by your HDHP.
The IRS has clear rules about when you can take a qualified distribution from an HSA. For example, qualified distributions can be used to pay for medical expenses you incurred in the prior year. But you have to have documented medical bills for these expenses. In addition, these expenses can’t have been paid for with another source of income and must not have been an itemized deduction for a previous tax year.
