Self-Directed HSA Archives

Self-Directed HSAs (Health Savings Accounts)

July 6, 2018/in Blog, Health Savings Account /by Jim Hitt

Eligible individuals are permitted to establish and maintain Health Savings Accounts (HSA)s, for the purpose of paying and/or reimbursing themselves for eligible medical expenses. Like IRAs, Self-Directed HSAs must be established and maintained with a qualified custodian/trustee, such as a brokerage firm or bank.

Self-Directed HSAs can be established by individuals or by employers; and contributions are deductible by the contributing party.

Eligibility

An individual must meet certain requirements, in order to be eligible for a Self-Directed HSA. These are:

The individual must be covered under a high deductible health plan (HDHP).
The individual must have no other health coverage, unless an exception applies.
The individual must not be enrolled under Medicare.
The individual must not be claimed as a dependent on another persons’ tax return, for the year in which the Self-Directed HSA contribution is made.

Individuals should consult with their tax professionals, to determine eligibility for HSAs.

Self-Directed HSA Contributions

Self-Directed HSA contributions must be made by the owner’s tax filing due date. Extensions do not apply.

An individual may claim a tax deduction for Self-Directed HSA contributions made to his/her HSA. If the contribution is made by the individual’s employer, the amounts are deductible by the employer but are excluded from the individual’s income.

Self-Directed HSA contributions grow on a tax-deferred basis, and are tax-free when distributed, if the distributions are used to pay for qualified expenses.

The contribution amount that an individual is eligible to make, is dependent on his/her:

Type of HDHP coverage,
Age,
Date of eligibility, and
If the individual ceases to be an eligible individual, the date on which such eligibility ceases.

The contribution limit for 2018 is $3,450 for those with self-only HDHP coverage, and $6,900 for those with family HDHP coverage. An additional catch-up contribution of $1,000 is permitted for individuals who are at least age 55 by the end of the year.

There are other factors that could affect the contribution eligibility, such as whether one is eligible for the entire year. Individuals must consult with their tax professional to determine whether they are eligible to contribute the full amounts stated above.

Contributions in excess of the statutory limit could be subject to excise tax, if not corrected properly and timely.

Distributions

During the Self-Directed HSA owner’s lifetime, distributions are optional.

The tax-treatment of distributions depend on whether they are ‘qualified’ or ‘nonqualified’.

Distributions from Self-Directed HSAs are tax-free if they are used to cover qualified medical expenses, which are expenses that would generally qualify as deductible medical and dental expenses on the individual’s tax return. Individuals should consult with their tax professionals to determine whether particular expenses meet this requirement.

Eligible expenses include those incurred by the Self-Directed HSA owner, as well as:

His/her spouse.
All dependents he/she claim on his/her tax return.
Any person he/she could have claimed as a dependent on his/her return except that:
1. The person filed a joint return,
2. The person had gross income of $4,050 or more, or
3. He/she and spouse if filing jointly, could be claimed as a dependent on someone else’s return for the year.

Generally, expenses incurred before the Self-Directed HSA was established are not considered eligible expenses.

Distributions that meet the eligibility expenses requirements are considered qualified distributions. Nonqualified distributions are treated as ordinary income to the Self-Directed HSA owner, and are subject to a 20% penalty, unless an exception applies.

Professional Help Is a Must

The information provided herein is a high-level overview of the rules that apply to Self-Directed HSAs, and failure to operate an HSA within the confines of the application regulations and operational requirements could result in the HSA owner being subject to excise taxes, penalties and ineligibility to deduct contributions.

Individuals should consult with a tax professional who is knowledgeable in the area of Self-Directed HSAs, to ensure that all the applicable rules and regulations are followed.

Interested in learning more about Self-Directed IRAs? Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation. Download our free guides or visit us online at www.AmericanIRA.com.

The Self-Directed HSA – Tapping Your Health Savings Account

July 25, 2016/in Articles, Blog, Health Savings Account, Health Savings Account, Home Link /by Jim Hitt

Have you been contribution to a health savings account for some time? If you’re in good health, you may be sitting on a fairly substantial sum. According to information from the Employee Benefit Research Institute and the New York Times, an investor contributing the maximum allowable per year to an HSA and who only generated a modest average 2.5 percent return could be sitting on as much as $360,000, if they didn’t need to spend anything down. And if they got just 5 percent, that number could be as high as $600,000. A skilled Self-Directed HSA investor can do quite a bit with a sum that big.

Nationwide, health savings accounts represent a lot of capital: As much as $30 billion as of the end of 2015, according to the 2015 Devinir Market Survey. This $30 billion is spread across 1.7 billion assets. Both assets and account numbers are expanding rapidly as the combination of high deductible health plans and health savings accounts gain in popularity among both individuals and employers. This leads us to our next subject, Self-Directed HSA and Retirement.

The primary purpose of the health savings account is, of course, to pay unreimbursed health care expenditures for yourself and your family. Contributions are pre-tax, and any distributions taken to pay for qualified health care expenditures are tax free. Unused balances continue to compound tax free. But if you withdraw money from your HSA before you turn 65 for non-qualified uses, you will have to pay income taxes, plus a 20 percent penalty. That’s twice as big as the 10 percent penalty that normally applies to early withdrawals of IRAs and 401(k)s.

But once you turn age 65, all of that money is fair game. You don’t have to pay any penalties for withdrawals for any purpose after that age. You simply pay the income tax on the amount you take out. It’s just like having an IRA at that point – except expenditures for health care expenses are still tax-free! If you had to raid an IRA to pay medical bills, you’d still have to pay income taxes.

This is why an HSA is a terrific asset to own.

HSAs have only been in existence for a little over a decade. But as long as you continue to contribute and remain in good health – or use other funds to finance health care expenditures – there’s no reason you can’t amass an amount that will make a definite positive difference in your retirement.

And like an IRA, you can choose to self-direct your HSA assets.

How? Simply open an account with American IRA, LLC, and fund it with your HSA assets, generally via a trustee-to-trustee transfer.

Then just tell us what you want to invest in – whom to wire your money to purchase the investment, and how much.

So doing opens a whole world of investments to the Self-Directed HSA owner:

Rental property
Private lending
Mortgage lending
Hard money lending
Tax liens and certificates
Fixing and flipping real estate properties
Private equity
Venture capital
Closely-held C corporations, LLCs and partnerships
Oil and gas investments
Farms and ranches
Horse training and breeding businesses
Fishing boats
Offshore businesses
Foreign real estate
Collateralized debt obligations

And much more.

A few tips: Remember the primary purpose of the health savings account: To pay health care expenses, either before or after you turn age 65. Liquidity is a factor: Keep track of your maximum out of pocket expenses for your high deductible health plan, as long as you’re in one, or for your existing health care plan or Medicare, and try to have that much in cash, cash equivalent or something easily and quickly converted to cash so you can pay those expenditures in the current year.

To learn more about the self-direction option for your health savings account, call us today at 866-7500-IRA(472), or visit us online at www.americanira.com.

We look forward to working with you.

The Self-Directed HSA – Tapping Your Health Savings Account

July 20, 2016/in Articles, Blog, Health Savings Account, Health Savings Account, Home Link /by Jim Hitt

Have you been contribution to a health savings account for some time? If you’re in good health, you may be sitting on a fairly substantial sum. According to information from the Employee Benefit Research Institute and the New York Times, an investor contributing the maximum allowable per year to an HSA and who only generated a modest average 2.5 percent return could be sitting on as much as $360,000, if they didn’t need to spend anything down. And if they got just 5 percent, that number could be as high as $600,000. A skilled Self-Directed HSA investor can do quite a bit with a sum that big.

Nationwide, health savings accounts represent a lot of capital: As much as $30 billion as of the end of 2015, according to the 2015 Devinir Market Survey. This $30 billion is spread across 1.7 billion assets. Both assets and account numbers are expanding rapidly as the combination of high deductible health plans and health savings accounts gain in popularity among both individuals and employers. May people don’t realize they can have a Self-Directed HSA.

Self-Directed HSAs and Retirement

The primary purpose of the health savings account is, of course, to pay unreimbursed health care expenditures for yourself and your family. Contributions are pre-tax, and any distributions taken to pay for qualified health care expenditures are tax free. Unused balances continue to compound tax free. But if you withdraw money from your HSA before you turn 65 for non-qualified uses, you will have to pay income taxes, plus a 20 percent penalty. That’s twice as big as the 10 percent penalty that normally applies to early withdrawals of IRAs and 401(k)s.

But once you turn age 65, all of that money is fair game. You don’t have to pay any penalties for withdrawals for any purpose after that age. You simply pay the income tax on the amount you take out. It’s just like having an IRA at that point – except expenditures for health care expenses are still tax-free! If you had to raid an IRA to pay medical bills, you’d still have to pay income taxes.

This is why a Self-Directed HSA is a terrific asset to own.

HSAs have only been in existence for a little over a decade. But as long as you continue to contribute and remain in good health – or use other funds to finance health care expenditures – there’s no reason you can’t amass an amount that will make a definite positive difference in your retirement.

And like an IRA, you can choose to self-direct your HSA assets.

How? Simply open an account with American IRA, LLC, and fund it with your HSA assets, generally via a trustee-to-trustee transfer.

Then just tell us what you want to invest in – whom to wire your money to purchase the investment, and how much.

So doing opens a whole world of investments to the Self-Directed HSA owner:

Rental property
Private lending
Mortgage lending
Hard money lending
Tax liens and certificates
Fixing and flipping real estate properties
Private equity
Venture capital
Closely-held C corporations, LLCs and partnerships
Oil and gas investments
Farms and ranches
Horse training and breeding businesses
Fishing boats
Offshore businesses
Foreign real estate
Collateralized debt obligations

And much more.

A few tips: Remember the primary purpose of the health savings account: To pay health care expenses, either before or after you turn age 65. Liquidity is a factor: Keep track of your maximum out of pocket expenses for your high deductible health plan, as long as you’re in one, or for your existing health care plan or Medicare, and try to have that much in cash, cash equivalent or something easily and quickly converted to cash so you can pay those expenditures in the current year.

To learn more about the self-direction option for your health savings account, call us today at 866-7500-IRA(472), or visit us online at www.americanira.com.

We look forward to working with you.

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Self-Directed HSAs (Health Savings Accounts)

The Self-Directed HSA – Tapping Your Health Savings Account

The Self-Directed HSA – Tapping Your Health Savings Account

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