JohnEyles wrote:

- quote -

This article discusses several of the issues that you raised:
http://www.mechanicsofmoney.com/2006_04_15_.php

I am not sure about issuing a credit to a HSA though
(especially after the tax year is closed).

Gary
http://www.mechanicsofmoney.com
http://www.mechanicsofmoney.com/blog.php

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In 2006, I became semi-retired, working for my old employer
as a consultant - but technically hired out to them by an
agency for whom I am a W2 employee.

This agency offers health insurance, but I'm not eligible
due to not putting in enough hours. Thus, I have purchased
an individual HSA policy from BCBS, with $2000 deductible.
I'm unsure about the tax consequences of all this, not to
mention the best tax strategy to use.

It seems clear that my HSA contribution ($2000) is
deductible as an adjustment to income (Form 8889). But am I
also eligible for the self-employed health insurance
adjustment, for the premiums I pay for the insurance policy?
I'm guessing not, so my premiums are deductible on Schedule
A subject to 7.5% AGI exclusion.

Which leads me to strategy. My AGI should be low enough
that the insurance premiums will just about get me past the
7.5% AGI exclusion. So it seems to me that I may be better
off paying my medical expenses, $2000 or so, directly rather
than from the HSA account. Thus, the HSA account continues
to grow tax-free, and the expenses are deductible on Sch A
since they'll be above the 7.5% exclusion. In fact, I'm
planning to ask my dentist to issue a credit to my HSA
MasterCard and then repay him from my bank account.

Does this all sound legal, and does it make sense?

Thanks, John

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