This is my first year with an HSA account and I’ve yet to use it properly. The basic premise of the HSA is that you can pay for medical expenses (including dental, vision, and even acupuncture and herbalists) with pre-tax dollars. Or, well, they’re post tax and then untaxed dollars, depending on how you do it.
The limit this year for an HSA account is $3000. Since I don’t have a 401k and I max out my Roth IRA, it seems like the next logical step would be to max out my HSA. My company puts in a bit of money each month so I have $2000 left that’s on me for the year. My plan now is to transfer $2000 into my HSA account before the end of the month. Nothing like waiting until the last minute.
I’m currently awaiting my HSA account to hook up with my bank account. They need to do that take out a few cents from your account so we know you’re legit and you can tell us what happened on your account thing before connecting with my checking account. Hopefully that won’t take too long.
Then I have to transfer $2000 to the HSA account, which I’m told can take up to 5 days. Then I have to, right away, transfer most of that $2000 BACK to my checking account to reimburse myself for all the medical expenses that I’ve had this year. I think there might still be a nickel or so left in my HSA account by the time I’m done with all the reimbursements.
How much am I really going to save on this? Well, I guess that $2000 extra income is shielded from federal tax (as long as I use it for a qualified medical expense). Since I’m probably in the 25% tax bracket this year, I’ll save $500? I think? Because California is a douche, that money still has to be taxed via the state’s 9% (?) rate. I’m extremely confused what that is going to look like come tax time. I’m guessing I have to pay 9% on $3000, or $270. I guess I’ll find out when I get on my Turbo Tax account and see what they have to tell me about my HSA account. I’m hoping I’ll understand it a bit more for next year.
Have any of you used an HSA account before? Is it a total hassle come tax time?