Publication 502 (2017), Medical and Dental Expenses

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An eligible individual and his dependent child are covered under an "employee plus one" HDHP offered by the individual's employer. Unused funds in an HSA continue to roll over in the account each year and collect tax-free interest. I saw you on TV. Follow up q to this excellent post. Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year.

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Visit our HSA Investment page to learn more. There are many benefits to your HSA that you should consider before closing your account.

Consider keeping your HSA to continue to save for your future health expenses, tax free. If you still feel a need to close your account, please call our Client Assistance Center at Your HSA funds are never lost due to changes in employment or health plan. If at some point you are no longer covered by an HDHP, you still have access to your funds and can use them to pay for IRS-qualified medical expenses; however you are simply no longer eligible to make contributions.

While it is a free download, you should check with your wireless provider for any associated fees for accessing the Internet from your device. Before you can use the app, you must create a Member Website username and password. As stated in the previous FAQ, if you have not already done so, you must be registered on the Member Website to use the mobile banking services.

You may receive both a SA and SA from us. Flexible Spending Accounts FSAs are tax-advantaged financial accounts that can be set-up through employers' cafeteria plans in the United States. An FSA allows an employee to designate a portion of his or her pre-tax earnings to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses, but often for dependent care or other expenditures.

The employer is also allowed to make contributions to employee FSAs, if desired, in order to offer a greater benefit to the staff. Enrolling in an FSA allows you to set aside pretax money from your paycheck. You will enjoy a tax savings on the money you can use for eligible health care expenses.

With an FSA, you elect to have your annual contribution deducted from your paycheck each pay period, in equal installments throughout the year, until you reach the yearly maximum that you have specified.

The amount of your pay that goes into an FSA will not count as taxable income, so you will have immediate tax savings. FSA dollars can be used during the plan year to pay for qualified expenses and services. Annual participant contributions are limited by The Internal Revenue Service. A Healthcare FSA allows reimbursement of qualifying out-of-pocket medical expenses. Common eligible expenses include dental treatment, orthodontia, prescription drugs, diagnostic services, hospital services and surgery, laboratory fees, obstetrical expenses, chiropractic care, physical therapy, eye examinations, glasses, contact lenses, laser eye surgery, hearing aids, smoking cessation programs, and weight loss programs to treat obesity, to name a few.

A limited FSA only allows reimbursement for preventive care, vision and dental expenses. A Dependent Care FSA allows reimbursement of dependent care expenses, such as daycare, incurred by eligible dependents.

All eligible out-of-pocket expenses incurred by you, your spouse and your qualified dependents can be reimbursed from your Healthcare FSA, even if your spouse and qualified dependents are not enrolled in your employer's health plan. Employers may elect a lower limit as part of their Healthcare FSA plan design. You should check with your Human Resources department for the specifics of your plan. The IRS contribution limit with be adjusted annually to account for inflation increases.

Requests for reimbursements should be submitted prior to the end of your employer's run-out period or period of time for which a claim for an expense can be submitted for a plan year that has ended or after an employee has terminated.

Health Reimbursement Arrangements HRAs are employer-funded plans that reimburse employees for incurred medical expenses that are not covered by the company's standard insurance plan. Because the employer funds the plan, any distributions are considered tax deductible to the employer. Reimbursement dollars received by the employee are generally tax-free. Unused HRA dollars may roll over from year to year, if allowed per plan rules, providing a potential incentive for employees to be better stewards of healthcare spending.

If employment is terminated, the employer can choose to keep unused funds. Your employer funds your HRA pre-tax. Because the money allocated by your employer doesn't count as income, there are no tax implications. It's kind of like getting a raise. Participating in an HRA is a great way to stretch your healthcare budget. An HRA usually sits alongside a health plan with higher deductible, coinsurance and copayment minimums; often these health plans have lower monthly medical premiums allowing you to save money.

Some employers allow you to rollover and accumulate unused funds year after year. The more you save in your HRA, the more funds you will have to pay eligible medical expenses when they occur. An employer may also make the HRA portable so that you can take the funds with you when your employment ends or when you retire.

HRA funds must be used for healthcare expenditures only. Approved healthcare expenditures include those expenses identified by your employer as reimbursable from the HRA that are described as Medical Expenses in Section d of the IRS code.

These expenses may include deductibles, coinsurance, copayments, prescription drugs, vision care and dental care. Your employer may limit the expenses your plan reimburses; please consult with your Human Resources department for more information on what expenses are covered by your HRA.

The IRS has a list of approved healthcare expenditures. However, your employer might have additional limitations. Examples of expenses that are not eligible for reimbursement include:. Medical expenses that do not meet IRS section d requirements e. Medical expenses incurred by you, your spouse or any eligible dependents prior to your effective date in the plan; and, Medical expenses that can be reimbursed to you through any other source such as group health insurance.

HRAs are only funded by your employer. Your employer contributes a determined amount to your HRA. Contact your HR department for specifics on your plan setup. An HRA is designed to cover expenses not paid by your health plan including deductibles, coinsurance and copayments as well as many expenses your health plan may not cover.

HRA funds can be used on eligible expenses determined by your employer. These typically include co-pays, health insurance deductibles and other IRS approved healthcare expenses. For more information on your plan, contact your HR department. You can access forms by logging into the Member Website. By accessing you will be leaving the HSA Bank web site and entering a web site hosted by another party.

Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of the HSA Bank web site. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of HSA Bank. HSA Bank shall not be responsible or liable for any loss incurred due to you using this third party site.

What is an HSA? Is an HSA right for me? Who is eligible to open an HSA? You must have a valid Social Security Number and a primary residence in the U. You cannot be covered by TriCare. You must be covered by the qualified HDHP on the first day of the month. What is a qualified high deductible healthcare plan HDHP? Can I be covered under another health plan and still open an HSA? What are the advantages of opening an HSA?

With an HSA, you'll have: A tax-advantaged savings account that you use to pay for IRS-qualified medical expenses as well as deductibles, co-insurance, prescriptions, vision and dental care Contributions to your HSA can be made with pre-tax dollars, which reduces your taxable income. Any after-tax contributions that you make to your HSA are tax deductible. Unused funds that will roll over year to year. There's no "use or lose it" penalty. Which expenses are considered IRS-qualified medical expenses?

You can work with your provider or hospital to make debit card payments over multiple days. Do I need to submit receipts for my HSA expenses? Can an HSA be used to pay for previous year expenses?

Where can I use my HSA? You engaged in any transaction prohibited by section with respect to any of your Archer MSAs at any time in Your account ceases to be an Archer MSA as of January 1, , and you must include the fair market value of all assets in the account as of January 1, , on Form You used any portion of any of your Archer MSAs as security for a loan at any time in Sale, exchange, or leasing of property between you and the Archer MSA;.

Furnishing goods, services, or facilities between you and the Archer MSA; and. Transfer to or use by you, or for your benefit, of any assets of the Archer MSA. How you report your distributions depends on whether or not you use the distribution for qualified medical expenses, defined earlier. See the Form instructions for more information. Report the additional tax in the total on Form or Form NR.

An Archer MSA is generally exempt from tax. You are permitted to take a distribution from your Archer MSA at any time; however, only those amounts used exclusively to pay for qualified medical expenses are tax free.

You should choose a beneficiary when you set up your Archer MSA. What happens to that Archer MSA when you die depends on whom you designate as the beneficiary. The fair market value of the Archer MSA becomes taxable to the beneficiary in the year in which you die.

If your estate is the beneficiary, the fair market value of the Archer MSA will be included on your final income tax return. You must file the form even if only your employer or your spouse's employer made contributions to the Archer MSA.

This section contains the rules that employers must follow if they decide to make Archer MSAs available to their employees. You can make contributions to your employees' Archer MSAs and deduct them for the year in which you make them.

If you decide to make contributions, you must make comparable contributions to all comparable participating employees' Archer MSAs. Have the same category of employment either part-time or full-time. Enter code "R" in box A Medicare Advantage MSA is a tax-exempt trust or custodial savings account that you set up with a financial institution such as a bank or an insurance company in which the Medicare program can deposit money for qualified medical expenses. An HDHP is a special health insurance policy that has a high deductible.

However, the policy must be approved by the Medicare program. You can get information by calling Medicare or through the Internet at Medicare. FSAs are usually funded through voluntary salary reduction agreements with your employer. No employment or federal income taxes are deducted from your contribution.

The employer also may contribute. Contributions made by your employer can be excluded from your gross income. No employment or federal income taxes are deducted from the contributions. Withdrawals may be tax free if you pay qualified medical expenses. Health FSAs are employer-established benefit plans. These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan.

Employers have complete flexibility to offer various combinations of benefits in designing their plan. You contribute to your FSA by electing an amount to be voluntarily withheld from your pay by your employer. This is sometimes called a salary reduction agreement. The employer also may contribute to your FSA if specified in the plan. However, contributions made by your employer to provide coverage for long-term care insurance must be included in income.

At the beginning of the plan year, you must designate how much you want to contribute. Then, your employer will deduct amounts periodically generally, every payday in accordance with your annual election. You can change or revoke your election only if there is a change in your employment or family status that is specified by the plan. This amount is indexed for inflation and may change from year to year.

However, see Balance in an FSA , later, for possible exceptions. For this reason, it is important to base your contribution on an estimate of the qualifying expenses you will have during the year. Generally, distributions from a health FSA must be paid only to reimburse you for qualified medical expenses you incurred during the period of coverage.

You must be able to receive the maximum amount of reimbursement the amount you have elected to contribute for the year at any time during the coverage period, regardless of the amount you have actually contributed. The maximum amount you can receive tax free is the total amount you elected to contribute to the health FSA for the year. You must provide the health FSA with a written statement from an independent third party stating that the medical expense has been incurred and the amount of the expense.

Debit cards, credit cards, and stored value cards given to you by your employer can be used to reimburse participants in a health FSA. If the use of these cards meets certain substantiation methods, you may not have to provide additional information to the health FSA. Qualified medical expenses are those specified in the plan that generally would qualify for the medical and dental expenses deduction. A medicine or drug will be a qualified medical expense for FSA purposes only if the medicine or drug: A special rule allows amounts in a health FSA to be distributed to reservists ordered or called to active duty.

This rule applies to distributions made after June 17, , if the plan has been amended to allow these distributions. Your employer must report the distribution as wages on your Form W-2 for the year in which the distribution is made.

The distribution is subject to employment taxes and is included in your gross income. A qualified reservist distribution is allowed if you were because you were in the reserves ordered or called to active duty for a period of more than days or for an indefinite period, and the distribution is made during the period beginning on the date of the order or call and ending on the last date that reimbursements could otherwise be made for the plan year that includes the date of the order or call.

Flexible spending arrangements are generally "use-it-or-lose-it" plans. However, the plan can provide for either a grace period or a carryover. If there is a grace period, any qualified medical expenses incurred in that period can be paid from any amounts left in the account at the end of the previous year.

See Qualified reservist distribution , earlier. The plan may specify a lower dollar amount as the maximum carryover amount. If the plan permits a carryover, any unused amounts in excess of the carryover amount are forfeited. For the health FSA to maintain tax-qualified status, employers must comply with certain requirements that apply to cafeteria plans.

For example, there are restrictions for plans that cover highly compensated employees and key employees. The plans also must comply with rules applicable to other accident and health plans. Chapters 1 and 2 of Pub. Employees are reimbursed tax free for qualified medical expenses up to a maximum dollar amount for a coverage period. Reimbursements may be tax free if you pay qualified medical expenses.

Any unused amounts in the HRA can be carried forward for reimbursements in later years. HRAs are employer-established benefit plans. These may be offered in conjunction with other employer-provided health benefits. HRAs are funded solely through employer contributions and may not be funded through employee salary deferrals under a cafeteria plan. There is no limit on the amount of money your employer can contribute to the accounts.

Additionally, the maximum reimbursement amount credited under the HRA in the future may be increased or decreased by amounts not previously used. See Balance in an HRA , later. Generally, distributions from an HRA must be paid to reimburse you for qualified medical expenses you have incurred. The expense must have been incurred on or after the date you are enrolled in the HRA.

Debit cards, credit cards, and stored value cards given to you by your employer can be used to reimburse participants in an HRA. If the use of these cards meets certain substantiation methods, you may not have to provide additional information to the HRA. If any distribution is, or can be, made for other than the reimbursement of qualified medical expenses, any distribution including reimbursement of qualified medical expenses made in the current tax year is included in gross income.

For example, if an unused reimbursement is payable to you in cash at the end of the year, or upon termination of your employment, any distribution from the HRA is included in your income.

This also applies if any unused amount upon your death is payable in cash to your beneficiary or estate, or if the HRA provides an option for you to transfer any unused reimbursement at the end of the year to a retirement plan. If the plan permits amounts to be paid as medical benefits to a designated beneficiary other than the employee's spouse or dependents , any distribution from the HRA is included in income.

A medicine or drug will be a qualified medical expense for HRA purposes only if the medicine or drug: Amounts that remain at the end of the year generally can be carried over to the next year.

These amounts may never be used for anything but reimbursements for qualified medical expenses. For an HRA to maintain tax-qualified status, employers must comply with certain requirements that apply to other accident and health plans. If you have questions about a tax issue, need help preparing your tax return, or want to download free publications, forms, or instructions, go to IRS.

Find free options to prepare and file your return on IRS. The Tax Counseling for the Elderly TCE program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors.

You can go to IRS. See if you qualify to use brand-name software to prepare and e-file your federal tax return for free. Getting answers to your tax questions. You can print the entire interview and the final response for your records.

You can also download and view popular tax publications and instructions including the instructions on mobile devices as an eBook at no charge. Or, you can go to IRS. View the amount you owe, pay online or set up an online payment agreement.

The fastest way to receive a tax refund is to combine direct deposit and IRS e-file. Direct deposit securely and electronically transfers your refund directly into your financial account. Eight in 10 taxpayers use direct deposit to receive their refund. This applies to the entire refund, not just the portion associated with these credits. The quickest way to get a copy of your tax transcript is to go to IRS.

If you prefer, you can: This includes any type of electronic communication, such as text messages and social media channels. Download the official IRS2Go app to your mobile device to check your refund status. The IRS uses the latest encryption technology to ensure your electronic payments are safe and secure. You can make electronic payments online, by phone, and from a mobile device using the IRS2Go app. Paying electronically is quick, easy, and faster than mailing in a check or money order.

Pay your individual tax bill or estimated tax payment directly from your checking or savings account at no cost to you.

Debit or credit card: Choose an approved payment processor to pay online, by phone, and by mobile device. Offered only when filing your federal taxes using tax preparation software or through a tax professional.

Electronic Federal Tax Payment System: Best option for businesses. Check or money order: Mail your payment to the address listed on the notice or instructions. You may be able to pay your taxes with cash at a participating retail store. Apply for an online payment agreement IRS. Once you complete the online process, you will receive immediate notification of whether your agreement has been approved. Please note that it can take up to 3 weeks from the date you mailed your amended return for it to show up in our system and processing it can take up to 16 weeks.

Keep in mind, many questions can be answered on IRS. Before you visit, go to IRS. Taxpayers can find information on IRS. The IRS TACs provide over-the-phone interpreter service in over languages, and the service is available free to taxpayers. Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights.

And our service is free. If you qualify for our assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:. We have offices in every state, the District of Columbia, and Puerto Rico. You can also call us at Our Tax Toolkit at TaxpayerAdvocate.

These are your rights. TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, please report it to us at IRS. LITCs represent individuals whose income is below a certain level and need to resolve tax problems with the IRS, such as audits, appeals, and tax collection disputes.

In addition, clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee.

To find a clinic near you, visit TaxpayerAdvocate. For you and your family. Individuals abroad and more. EINs and other information. Get Your Tax Record. Bank Account Direct Pay. Debit or Credit Card. Payment Plan Installment Agreement. Standard mileage and other information. Instructions for Form Request for Transcript of Tax Return. Employee's Withholding Allowance Certificate. Employer's Quarterly Federal Tax Return. Employers engaged in a trade or business who pay compensation.

Popular For Tax Pros. Apply for Power of Attorney. Apply for an ITIN. Ordering forms and publications. Family plans that dont meet the high deductible rules. Other employee health plans. Health FSA grace period. Reduction of contribution limit. Rules for married people. Qualified HSA funding distribution.

Funding distribution testing period. Deducting an excess contribution in a later year. Health coverage tax credit. Deemed distributions from HSAs. Reporting Distributions on Your Return Additional tax.

Spouse isnt the designated beneficiary. Filing Form Employer Participation Health plan. High deductible health plan HDHP. Limits Annual deductible limit. Individuals enrolled in Medicare. Special rules for insurance premiums. Deemed distributions from Archer MSAs.

Reporting Distributions on Your Return Rollovers. Getting tax forms and publications. Access your online account Individual taxpayers only. Delayed refund for returns claiming certain credits. Getting a transcript or copy of a return. Using online tools to help prepare your return. Resolving tax-related identity theft issues.

Checking on the status of your refund. Making a tax payment. What if I cant pay now? Checking the status of an amended return. Understanding an IRS notice or letter.

Contacting your local IRS office. Getting tax information in other languages. How Can You Reach Us? Publication - Introductory Material. Publication - Main Content.

What are the benefits of an HSA? You may enjoy several benefits from having an HSA. The contributions remain in your account until you use them. A higher annual deductible than typical health plans, and A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Routine prenatal and well-child care. Child and adult immunizations. Heart and vascular diseases. Metabolic, nutritional, and endocrine conditions. Obstetric and gynecological conditions.

Vision and hearing disorders. Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. A specific disease or illness. A fixed amount per day or other period of hospitalization.

Health FSA — grace period. Funding distribution — testing period. Reporting Contributions on Your Return. Requires a prescription, Is available without a prescription an over-the-counter medicine or drug and you get a prescription for it, or Is insulin.

You and your spouse. All dependents you claim on your tax return. Reporting Distributions on Your Return. Spouse is the designated beneficiary. The same amount, or The same percentage of the annual deductible limit under the HDHP covering the employees.

Are covered by your HDHP and are eligible to establish an HSA, Have the same category of coverage either self-only or family coverage , and Have the same category of employment part-time, full-time, or former employees. You were an active participant for any tax year ending before , or You became an active participant for a tax year ending after , by reason of coverage under a high deductible health plan HDHP of an Archer MSA participating employer.

What are the benefits of an Archer MSA? You may enjoy several benefits from having an Archer MSA. Qualifying for an Archer MSA. Had 50 or fewer employees when the Archer MSAs began, Made a contribution that was excludable or deductible as an Archer MSA for the last year he or she had 50 or fewer employees, and Had an average of or fewer employees each year after A higher annual deductible than typical health plans, and A maximum limit on the annual out-of-pocket medical expenses that you must pay for covered expenses.

Who can contribute to my Archer MSA? The annual deductible limit. Are covered by your HDHP and are eligible to establish an Archer MSA, Have the same category of coverage either self-only or family coverage , and Have the same category of employment either part-time or full-time.

What are the benefits of an FSA? You may enjoy several benefits from having an FSA. Amounts paid for health insurance premiums. Amounts paid for long-term care coverage or expenses. Amounts that are covered under another health plan. What are the benefits of an HRA? You may enjoy several benefits from having an HRA. Current and former employees. Spouses and dependents of those employees. Amounts paid for long-term care coverage. Preparing and filing your tax return. You may also be able to access tax law information in your electronic filing software.

Access your tax records online. Review the past 18 months of your payment history. Order your transcript by calling Call the automated refund hotline at What is the Taxpayer Advocate Service?

Publication - Additional Material. Assistance see Tax help. I Identity theft, Resolving tax-related identity theft issues. M Medical expenses, qualified, Qualified medical expenses. Publications see Tax help.