I think what the Treasury FAQ is referring to there is the
fact that your HSA contribution doesn't happen on your
Schedule C, and is therefore subject to SE tax.

I was confused by that myself (sorry for any panic I may
have induced in the previous posters). *However* - your
High Deductible Health Plan premiums are *not* deductible,
the way normal health plan premiums are:

http://www.treas.gov/offices/public-...ing.shtml#hsa9

The exception seems to be Group Plans - i.e. if you're
providing insurance for yourself and employees as a Sole
Proprietor:

http://www.leaguefinancial.com/group_hsa.html says the following:

"The only "individuals" who can take an above-the-line
tax-deduction for both the HSA-HDHP premiums and Savings
Account deposits they make are Sole-Proprietors, and 2% or
greater Owners in an S-Corporation or Partnership.

Other persons, and especially Owners/Officer employees of
traditional C-Corporations are not permitted, under current
tax law, a personal tax-deduction for such HDHP premium
payments."

So my new-now-most-current-understanding of the example I
gave above is: with the HSA, you can spend roughly

$1200 premium savings - ($3600 * 15%) + (HSA contrib * 15%)

out-of-pocket on getting sick before it would have been
cheaper to not have an HSA. So for instance if your
out-of-pocket costs for the year are $1000, your "break even
contribution" is $2267.

mitch

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meeotch[at]gmail.com wrote:

- quote -

"Self-employed pre-tax dollars"???? What? Only employees can
have pre-tax dollars....

- quote -

An existing MSA may continue to exist in its current form, but
no new accounts may be opened.

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- quote -

Yes, according to form 8889, line 11.

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eeotch[at]gmail.com wrote:

- quote -

Can't the HSA contribution be taken as an adjustment on line
25 (1040)? If not, I'm in trouble.

George

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- quote -

A few random thoughts.

First, watch out for state taxes. I live in California, and
got bitten by the state's decision not to conform with the
federal rules for HSAs. They basically don't recognize the
existence of HSAs for the purpose of state income tax. I
rolled over my MSA into an HSA: big mistake because the
state penalized me for using the MSA for what they
considered to be a non-medical purpose.

To "close out" an MSA, I'd suggest draining it by paying
medical bills, for as long as it takes. If you just withdraw
the funds you may end up being penalized by both the feds
and the state. There are qualifications (like
employment/insurance status) for putting funds into an MSA,
but once they're in there are no penalties for spending the
funds on medical expenses. While the MSA is draining, you
can start an HSA too.

Disclaimer: I'm not a tax pro, just somebody who has had an
MSA and an HSA.

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So I've spent a significant chunk of time googling this, and
I'm still confused. As I understand it, a self-employed
person cannot contribute pre-tax dollars to an HSA:

http://www.ustreas.gov/offices/publi...on.shtml#hsa11

But we /can/ deduct the cost of our high-deductible health
plan premiums, just as we normally do. So for someone who's
paying, say, $300/month for a low-deductible plan, and is
considering a $200/month $1500 high-deductible plan + HSA:

old = pay only SE tax on $3600
new = pay only SE tax on $2400, but full fed tax on $1500
HSA contribution

Using roughly 15% for SE, we've got:

old = $540 tax savings, $3600 in premiums
new = $360 tax savings, $2400 in premiums

Meaning about $1020 left to spend on getting sick, before it
becomes a bad idea. Does that sound right?

Bonus Question: I've got an Archer MSA from back in Ye Olde
Days. I was going to close it out, as I currently don't
have a high-deductible plan (I'm in New York, where the
high-deductible plans don't seem to be such a great
bargain.) My questions: are there any substantive
differences between MSA's and HSA's? Is it true that no new
MSA's may be written after 2003, or were they made
permanent? Is there any reason to keep my MSA, rather than
shutting it down & just getting an HSA in the future if I
choose?

mitch

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