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Efile Tax Calculator

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Efile Tax Calculator

Efile tax calculator Publication 523 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. Efile tax calculator Tax questions. Efile tax calculator Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 523, such as legislation enacted after it was published, go to www. Efile tax calculator irs. Efile tax calculator gov/pub523. Efile tax calculator Reminders Change of address. Efile tax calculator  If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. Efile tax calculator Mail it to the Internal Revenue Service Center for your old address. Efile tax calculator (Addresses for the Service Centers are on the back of the form. Efile tax calculator ) Home sold with undeducted points. Efile tax calculator  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of sale. Efile tax calculator See Points in Publication 936, Home Mortgage Interest Deduction. Efile tax calculator Photographs of missing children. Efile tax calculator  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Efile tax calculator Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Efile tax calculator You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Efile tax calculator Introduction This publication explains the tax rules that apply when you sell your main home. Efile tax calculator In most cases, your main home is the one in which you live most of the time. Efile tax calculator If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). Efile tax calculator See Excluding the Gain , later. Efile tax calculator Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. Efile tax calculator If you have gain that cannot be excluded, you generally must report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040), Capital Gains and Losses. Efile tax calculator You may also have to complete Form 4797, Sales of Business Property. Efile tax calculator See Reporting the Sale , later. Efile tax calculator If you have a loss on the sale, you generally cannot deduct it on your return. Efile tax calculator However, you may need to report it. Efile tax calculator See Reporting the Sale , later. Efile tax calculator The main topics in this publication are: Figuring gain or loss, Basis, Excluding the gain, Ownership and use tests, and Reporting the sale. Efile tax calculator Other topics include: Business use or rental of home, Deducting taxes in the year of sale, and Recapturing a federal mortgage subsidy. Efile tax calculator Net Investment Income Tax (NIIT). Efile tax calculator   If any part of the gain on the sale of a home is not excluded under the rules discussed in this publication, it may be subject to the NIIT. Efile tax calculator For more details, see Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions. Efile tax calculator Worksheets. Efile tax calculator   Near the end of this publication you will find worksheets you can use to figure your gain (or loss) and your exclusion. Efile tax calculator Use Worksheet 1 to figure the adjusted basis of the home you sold. Efile tax calculator Use Worksheet 2 to figure the gain (or loss), the exclusion, and the taxable gain (if any) on the sale. Efile tax calculator If you do not qualify for the maximum exclusion, use Worksheet 3 to figure your reduced maximum exclusion. Efile tax calculator Date of sale. Efile tax calculator    If you received a Form 1099-S, Proceeds From Real Estate Transactions, the date of sale should be shown in box 1. Efile tax calculator If you did not receive this form, the date of sale is the earlier of (a) the date title transferred or (b) the date the economic burdens and benefits of ownership shifted to the buyer. Efile tax calculator In most cases, these dates are the same. Efile tax calculator What is not covered in this publication. Efile tax calculator   This publication does not cover the sale of rental property, second homes, or vacation homes. Efile tax calculator For information on how to report any gain or loss from those sales, see Publication 544, Sales and Other Dispositions of Assets. Efile tax calculator Comments and suggestions. Efile tax calculator   We welcome your comments about this publication and your suggestions for future editions. Efile tax calculator   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Efile tax calculator NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Efile tax calculator Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Efile tax calculator   You can send your comments from www. Efile tax calculator irs. Efile tax calculator gov/formspubs/. Efile tax calculator Click on “More Information” and then on “Comment on Tax Forms and Publications”. Efile tax calculator   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Efile tax calculator Ordering forms and publications. Efile tax calculator   Visit www. Efile tax calculator irs. Efile tax calculator gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Efile tax calculator Internal Revenue Service 1201 N. Efile tax calculator Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Efile tax calculator   If you have a tax question, check the information available on IRS. Efile tax calculator gov or call 1-800-829-1040. Efile tax calculator We cannot answer tax questions sent to either of the above addresses. Efile tax calculator Useful Items - You may want to see: Publication 527 Residential Rental Property 530 Tax Information for Homeowners 544 Sales and Other Dispositions of Assets 547 Casualties, Disasters, and Thefts 551 Basis of Assets 587 Business Use of Your Home 936 Home Mortgage Interest Deduction 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 1040 U. Efile tax calculator S. Efile tax calculator Individual Income Tax Return 1040NR U. Efile tax calculator S. Efile tax calculator Nonresident Alien Income Tax Return 1040X Amended U. Efile tax calculator S. Efile tax calculator Individual Income Tax Return 1099-S Proceeds From Real Estate Transactions 4797 Sales of Business Property 5405 Repayment of the First-Time Homebuyer Credit 8822 Change of Address 8828 Recapture of Federal Mortgage Subsidy 8939 Allocation of Increase in Basis for Property Acquired From a Decedent 8949 Sales and Other Dispositions of Capital Assets W-2 Wage and Tax Statement See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Efile tax calculator Prev  Up  Next   Home   More Online Publications
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Efile tax calculator Publication 969 - Main Content Table of Contents Health Savings Accounts (HSAs)Qualifying for an HSA Contributions to an HSA Distributions From an HSA Balance in an HSA Death of HSA Holder Filing Form 8889 Employer Participation Medical Savings Accounts (MSAs)Archer MSAs Contributions to an MSA Distributions From an MSA Balance in an Archer MSA Death of the Archer MSA Holder Filing Form 8853 Employer Participation Medicare Advantage MSAs Flexible Spending Arrangements (FSAs)Qualifying for an FSA Contributions to an FSA Distributions From an FSA Balance in an FSA Employer Participation Health Reimbursement Arrangements (HRAs)Qualifying for an HRA Contributions to an HRA Distributions From an HRA Balance in an HRA Employer Participation How To Get Tax HelpLow Income Taxpayer Clinics Health Savings Accounts (HSAs) A health savings account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. Efile tax calculator You must be an eligible individual to qualify for an HSA. Efile tax calculator No permission or authorization from the IRS is necessary to establish an HSA. Efile tax calculator You set up an HSA with a trustee. Efile tax calculator A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. Efile tax calculator The HSA can be established through a trustee that is different from your health plan provider. Efile tax calculator Your employer may already have some information on HSA trustees in your area. Efile tax calculator If you have an Archer MSA, you can generally roll it over into an HSA tax free. Efile tax calculator See Rollovers, later. Efile tax calculator What are the benefits of an HSA?   You may enjoy several benefits from having an HSA. Efile tax calculator You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040. Efile tax calculator Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income. Efile tax calculator The contributions remain in your account until you use them. Efile tax calculator The interest or other earnings on the assets in the account are tax free. Efile tax calculator Distributions may be tax free if you pay qualified medical expenses. Efile tax calculator See Qualified medical expenses , later. Efile tax calculator An HSA is “portable. Efile tax calculator ” It stays with you if you change employers or leave the work force. Efile tax calculator Qualifying for an HSA To be an eligible individual and qualify for an HSA, you must meet the following requirements. Efile tax calculator You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month. Efile tax calculator You have no other health coverage except what is permitted under Other health coverage , later. Efile tax calculator You are not enrolled in Medicare. Efile tax calculator You cannot be claimed as a dependent on someone else's 2013 tax return. Efile tax calculator Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers). Efile tax calculator If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you. Efile tax calculator If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an HSA contribution. Efile tax calculator This is true even if the other person does not actually claim your exemption. Efile tax calculator Each spouse who is an eligible individual who wants an HSA must open a separate HSA. Efile tax calculator You cannot have a joint HSA. Efile tax calculator High deductible health plan (HDHP). Efile tax calculator   An HDHP has: 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. Efile tax calculator Out-of-pocket expenses include copayments and other amounts, but do not include premiums. Efile tax calculator   An HDHP may provide preventive care benefits without a deductible or with a deductible less than the minimum annual deductible. Efile tax calculator Preventive care includes, but is not limited to, the following. Efile tax calculator Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals. Efile tax calculator Routine prenatal and well-child care. Efile tax calculator Child and adult immunizations. Efile tax calculator Tobacco cessation programs. Efile tax calculator Obesity weight-loss programs. Efile tax calculator Screening services. Efile tax calculator This includes screening services for the following: Cancer. Efile tax calculator Heart and vascular diseases. Efile tax calculator Infectious diseases. Efile tax calculator Mental health conditions. Efile tax calculator Substance abuse. Efile tax calculator Metabolic, nutritional, and endocrine conditions. Efile tax calculator Musculoskeletal disorders. Efile tax calculator Obstetric and gynecological conditions. Efile tax calculator Pediatric conditions. Efile tax calculator Vision and hearing disorders. Efile tax calculator For more information on screening services, see Notice 2004-23, 2004-15 I. Efile tax calculator R. Efile tax calculator B. Efile tax calculator 725 available at www. Efile tax calculator irs. Efile tax calculator gov/irb/2004-15_IRB/ar10. Efile tax calculator html. Efile tax calculator     The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2013. Efile tax calculator      Self-only coverage Family coverage Minimum annual deductible $1,250 $2,500 Maximum annual deductible and other out-of-pocket expenses* $6,250 $12,500 * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Efile tax calculator Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Efile tax calculator    The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2014. Efile tax calculator      Self-only coverage Family coverage Minimum annual deductible $1,250 $2,500 Maximum annual deductible and other out-of-pocket expenses* $6,350 $12,700 * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Efile tax calculator Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Efile tax calculator   Self-only HDHP coverage is an HDHP covering only an eligible individual. Efile tax calculator Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual). Efile tax calculator Example. Efile tax calculator An eligible individual and his dependent child are covered under an “employee plus one” HDHP offered by the individual's employer. Efile tax calculator This is family HDHP coverage. Efile tax calculator Family plans that do not meet the high deductible rules. Efile tax calculator   There are some family plans that have deductibles for both the family as a whole and for individual family members. Efile tax calculator Under these plans, if you meet the individual deductible for one family member, you do not have to meet the higher annual deductible amount for the family. Efile tax calculator If either the deductible for the family as a whole or the deductible for an individual family member is less than the minimum annual deductible for family coverage, the plan does not qualify as an HDHP. Efile tax calculator Example. Efile tax calculator You have family health insurance coverage in 2013. Efile tax calculator The annual deductible for the family plan is $3,500. Efile tax calculator This plan also has an individual deductible of $1,500 for each family member. Efile tax calculator The plan does not qualify as an HDHP because the deductible for an individual family member is less than the minimum annual deductible ($2,500) for family coverage. Efile tax calculator Other health coverage. Efile tax calculator   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Efile tax calculator However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Efile tax calculator    You can have additional insurance that provides benefits only for the following items. Efile tax calculator Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property. Efile tax calculator A specific disease or illness. Efile tax calculator A fixed amount per day (or other period) of hospitalization. Efile tax calculator   You can also have coverage (whether provided through insurance or otherwise) for the following items. Efile tax calculator Accidents. Efile tax calculator Disability. Efile tax calculator Dental care. Efile tax calculator Vision care. Efile tax calculator Long-term care. Efile tax calculator    Plans in which substantially all of the coverage is through the items listed earlier are not HDHPs. Efile tax calculator For example, if your plan provides coverage substantially all of which is for a specific disease or illness, the plan is not an HDHP for purposes of establishing an HSA. Efile tax calculator Prescription drug plans. Efile tax calculator   You can have a prescription drug plan, either as part of your HDHP or a separate plan (or rider), and qualify as an eligible individual if the plan does not provide benefits until the minimum annual deductible of the HDHP has been met. Efile tax calculator If you can receive benefits before that deductible is met, you are not an eligible individual. Efile tax calculator Other employee health plans. Efile tax calculator   An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally cannot make contributions to an HSA. Efile tax calculator Health FSAs and HRAs are discussed later. Efile tax calculator   However, an employee can make contributions to an HSA while covered under an HDHP and one or more of the following arrangements. Efile tax calculator Limited-purpose health FSA or HRA. Efile tax calculator These arrangements can pay or reimburse the items listed earlier under Other health coverage except long-term care. Efile tax calculator Also, these arrangements can pay or reimburse preventive care expenses because they can be paid without having to satisfy the deductible. Efile tax calculator Suspended HRA. Efile tax calculator Before the beginning of an HRA coverage period, you can elect to suspend the HRA. Efile tax calculator The HRA does not pay or reimburse, at any time, the medical expenses incurred during the suspension period except preventive care and items listed under Other health coverage. Efile tax calculator When the suspension period ends, you are no longer eligible to make contributions to an HSA. Efile tax calculator Post-deductible health FSA or HRA. Efile tax calculator These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. Efile tax calculator The deductible for these arrangements does not have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met. Efile tax calculator Retirement HRA. Efile tax calculator This arrangement pays or reimburses only those medical expenses incurred after retirement. Efile tax calculator After retirement you are no longer eligible to make contributions to an HSA. Efile tax calculator Health FSA – grace period. Efile tax calculator   Coverage during a grace period by a general purpose health FSA is allowed if the balance in the health FSA at the end of its prior year plan is zero. Efile tax calculator See Flexible Spending Arrangements (FSAs) , later. Efile tax calculator Contributions to an HSA Any eligible individual can contribute to an HSA. Efile tax calculator For an employee's HSA, the employee, the employee's employer, or both may contribute to the employee's HSA in the same year. Efile tax calculator For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. Efile tax calculator Family members or any other person may also make contributions on behalf of an eligible individual. Efile tax calculator Contributions to an HSA must be made in cash. Efile tax calculator Contributions of stock or property are not allowed. Efile tax calculator Limit on Contributions The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. Efile tax calculator For 2013, if you have self-only HDHP coverage, you can contribute up to $3,250. Efile tax calculator If you have family HDHP coverage, you can contribute up to $6,450. Efile tax calculator For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. Efile tax calculator If you have family HDHP coverage you can contribute up to $6,550. Efile tax calculator If you were, or were considered (under the last-month rule, discussed later), an eligible individual for the entire year and did not change your type of coverage, you can contribute the full amount based on your type of coverage. Efile tax calculator However, if you were not an eligible individual for the entire year or changed your coverage during the year, your contribution limit is the greater of: The limitation shown on the Line 3 Limitation Chart and Worksheetin the Instructions for Form 8889, Health Savings Accounts (HSAs), or The maximum annual HSA contribution based on your HDHP coverage (self-only or family) on the first day of the last month of your tax year. Efile tax calculator If you had family HDHP coverage on the first day of the last month of your tax year, your contribution limit for 2013 is $6,450 even if you changed coverage during the year. Efile tax calculator Last-month rule. Efile tax calculator   Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. Efile tax calculator You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month. Efile tax calculator Testing period. Efile tax calculator   If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. Efile tax calculator For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. Efile tax calculator For example, December 1, 2013, through December 31, 2014. Efile tax calculator   If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the total contributions made to your HSA that would not have been made except for the last-month rule. Efile tax calculator You include this amount in your income in the year in which you fail to be an eligible individual. Efile tax calculator This amount is also subject to a 10% additional tax. Efile tax calculator The income and additional tax are shown on Form 8889, Part III. Efile tax calculator Example 1. Efile tax calculator Chris, age 53, becomes an eligible individual on December 1, 2013. Efile tax calculator He has family HDHP coverage on that date. Efile tax calculator Under the last-month rule, he contributes $6,450 to his HSA. Efile tax calculator Chris fails to be an eligible individual in June 2014. Efile tax calculator Because Chris did not remain an eligible individual during the testing period (December 1, 2013, through December 31, 2014), he must include in his 2014 income the contributions made in 2013 that would not have been made except for the last-month rule. Efile tax calculator Chris uses the worksheet in the Form 8889 instructions to determine this amount. Efile tax calculator January -0- February -0- March -0- April -0- May -0- June -0- July -0- August -0- September -0- October -0- November -0- December $6,450. Efile tax calculator 00 Total for all months $6,450. Efile tax calculator 00 Limitation. Efile tax calculator Divide the total by 12 $537. Efile tax calculator 50 Chris would include $5,912. Efile tax calculator 50 ($6,450. Efile tax calculator 00 – $537. Efile tax calculator 50) in his gross income on his 2014 tax return. Efile tax calculator Also, a 10% additional tax applies to this amount. Efile tax calculator Example 2. Efile tax calculator Erika, age 39, has self-only HDHP coverage on January 1, 2013. Efile tax calculator Erika changes to family HDHP coverage on November 1, 2013. Efile tax calculator Because Erika has family HDHP coverage on December 1, 2013, she contributes $6,450 for 2013. Efile tax calculator Erika fails to be an eligible individual in March 2014. Efile tax calculator Because she did not remain an eligible individual during the testing period (December 1, 2013, through December 31, 2014), she must include in income the contribution made that would not have been made except for the last-month rule. Efile tax calculator Erika uses the worksheet in the Form 8889 instructions to determine this amount. Efile tax calculator January $3,250. Efile tax calculator 00 February $3,250. Efile tax calculator 00 March $3,250. Efile tax calculator 00 April $3,250. Efile tax calculator 00 May $3,250. Efile tax calculator 00 June $3,250. Efile tax calculator 00 July $3,250. Efile tax calculator 00 August $3,250. Efile tax calculator 00 September $3,250. Efile tax calculator 00 October $3,250. Efile tax calculator 00 November $6,450. Efile tax calculator 00 December $6,450. Efile tax calculator 00 Total for all months $45,400. Efile tax calculator 00 Limitation. Efile tax calculator Divide the total by 12 $3,783. Efile tax calculator 34 Erika would include $2,666. Efile tax calculator 67 ($6,450 – $3,783. Efile tax calculator 34) in her gross income on her 2014 tax return. Efile tax calculator Also, a 10% additional tax applies to this amount. Efile tax calculator Additional contribution. Efile tax calculator   If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. Efile tax calculator For example, if you have self-only coverage, you can contribute up to $4,250 (the contribution limit for self-only coverage ($3,250) plus the additional contribution of $1,000). Efile tax calculator However, see Enrolled in Medicare , later. Efile tax calculator If you have more than one HSA in 2013, your total contributions to all the HSAs cannot be more than the limits discussed earlier. Efile tax calculator Reduction of contribution limit. Efile tax calculator   You must reduce the amount that can be contributed (including any additional contribution) to your HSA by the amount of any contribution made to your Archer MSA (including employer contributions) for the year. Efile tax calculator A special rule applies to married people, discussed next, if each spouse has family coverage under an HDHP. Efile tax calculator Rules for married people. Efile tax calculator   If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. Efile tax calculator If each spouse has family coverage under a separate plan, the contribution limit for 2013 is $6,450. Efile tax calculator You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. Efile tax calculator After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division. Efile tax calculator The rules for married people apply only if both spouses are eligible individuals. Efile tax calculator If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. Efile tax calculator If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,450. Efile tax calculator Each spouse must make the additional contribution to his or her own HSA. Efile tax calculator Example. Efile tax calculator For 2013, Mr. Efile tax calculator Auburn and his wife are both eligible individuals. Efile tax calculator They each have family coverage under separate HDHPs. Efile tax calculator Mr. Efile tax calculator Auburn is 58 years old and Mrs. Efile tax calculator Auburn is 53. Efile tax calculator Mr. Efile tax calculator and Mrs. Efile tax calculator Auburn can split the family contribution limit ($6,450) equally or they can agree on a different division. Efile tax calculator If they split it equally, Mr. Efile tax calculator Auburn can contribute $4,225 to an HSA (one-half the maximum contribution for family coverage ($3,225) + $1,000 additional contribution) and Mrs. Efile tax calculator Auburn can contribute $3,225 to an HSA. Efile tax calculator Employer contributions. Efile tax calculator   You must reduce the amount you, or any other person, can contribute to your HSA by the amount of any contributions made by your employer that are excludable from your income. Efile tax calculator This includes amounts contributed to your account by your employer through a cafeteria plan. Efile tax calculator Enrolled in Medicare. Efile tax calculator   Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. Efile tax calculator Example. Efile tax calculator You turned age 65 in July 2013 and enrolled in Medicare. Efile tax calculator You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Efile tax calculator Your contribution limit is $2,125 ($4,250 × 6 ÷ 12). Efile tax calculator Qualified HSA funding distribution. Efile tax calculator   A qualified HSA funding distribution may be made from your traditional IRA or Roth IRA to your HSA. Efile tax calculator This distribution cannot be made from an ongoing SEP IRA or SIMPLE IRA. Efile tax calculator For this purpose, a SEP IRA or SIMPLE IRA is ongoing if an employer contribution is made for the plan year ending with or within your tax year in which the distribution would be made. Efile tax calculator   The maximum qualified HSA funding distribution depends on the HDHP coverage (self-only or family) you have on the first day of the month in which the contribution is made and your age as of the end of the tax year. Efile tax calculator The distribution must be made directly by the trustee of the IRA to the trustee of the HSA. Efile tax calculator The distribution is not included in your income, is not deductible, and reduces the amount that can be contributed to your HSA. Efile tax calculator The qualified HSA funding distribution is shown on Form 8889 for the year in which the distribution is made. Efile tax calculator   You can make only one qualified HSA funding distribution during your lifetime. Efile tax calculator However, if you make a distribution during a month when you have self-only HDHP coverage, you can make another qualified HSA funding distribution in a later month in that tax year if you change to family HDHP coverage. Efile tax calculator The total qualified HSA funding distribution cannot be more than the contribution limit for family HDHP coverage plus any additional contribution to which you are entitled. Efile tax calculator Example. Efile tax calculator In 2013, you are an eligible individual, age 57, with self-only HDHP coverage. Efile tax calculator You can make a qualified HSA funding distribution of $4,250 ($3,250 plus $1,000 additional contribution). Efile tax calculator Funding distribution – testing period. Efile tax calculator   You must remain an eligible individual during the testing period. Efile tax calculator For a qualified HSA funding distribution, the testing period begins with the month in which the qualified HSA funding distribution is contributed and ends on the last day of the 12th month following that month. Efile tax calculator For example, if a qualified HSA funding distribution is contributed to your HSA on August 10, 2013, your testing period begins in August 2013, and ends on August 31, 2014. Efile tax calculator   If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the qualified HSA funding distribution. Efile tax calculator You include this amount in income in the year in which you fail to be an eligible individual. Efile tax calculator This amount is also subject to a 10% additional tax. Efile tax calculator The income and the additional tax are shown on Form 8889, Part III. Efile tax calculator   Each qualified HSA funding distribution allowed has its own testing period. Efile tax calculator For example, you are an eligible individual, age 45, with self-only HDHP coverage. Efile tax calculator On June 18, 2013, you make a qualified HSA funding distribution of $3,250. Efile tax calculator On July 27, 2013, you enroll in family HDHP coverage and on August 17, 2013, you make a qualified HSA funding distribution of $3,200. Efile tax calculator Your testing period for the first distribution begins in June 2013 and ends on June 30, 2014. Efile tax calculator Your testing period for the second distribution begins in August 2013 and ends on August 31, 2014. Efile tax calculator   The testing period rule that applies under the last-month rule (discussed earlier) does not apply to amounts contributed to an HSA through a qualified HSA funding distribution. Efile tax calculator If you remain an eligible individual during the entire funding distribution testing period, then no amount of that distribution is included in income and will not be subject to the additional tax for failing to meet the last-month rule testing period. Efile tax calculator Rollovers A rollover contribution is not included in your income, is not deductible, and does not reduce your contribution limit. Efile tax calculator Archer MSAs and other HSAs. Efile tax calculator   You can roll over amounts from Archer MSAs and other HSAs into an HSA. Efile tax calculator You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Efile tax calculator Rollover contributions do not need to be in cash. Efile tax calculator Rollovers are not subject to the annual contribution limits. Efile tax calculator   You must roll over the amount within 60 days after the date of receipt. Efile tax calculator You can make only one rollover contribution to an HSA during a 1-year period. Efile tax calculator Note. Efile tax calculator If you instruct the trustee of your HSA to transfer funds directly to the trustee of another of your HSAs, the transfer is not considered a rollover. Efile tax calculator There is no limit on the number of these transfers. Efile tax calculator Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889. Efile tax calculator When To Contribute You can make contributions to your HSA for 2013 until April 15, 2014. Efile tax calculator If you fail to be an eligible individual during 2013, you can still make contributions, up until April 15, 2014, for the months you were an eligible individual. Efile tax calculator Your employer can make contributions to your HSA between January 1, 2014, and April 15, 2014, that are allocated to 2013. Efile tax calculator Your employer must notify you and the trustee of your HSA that the contribution is for 2013. Efile tax calculator The contribution will be reported on your 2014 Form W-2. Efile tax calculator Reporting Contributions on Your Return Contributions made by your employer are not included in your income. Efile tax calculator Contributions to an employee's account by an employer using the amount of an employee's salary reduction through a cafeteria plan are treated as employer contributions. Efile tax calculator Generally, you can claim contributions you made and contributions made by any other person, other than your employer, on your behalf, as an adjustment to income. Efile tax calculator Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Efile tax calculator The contributions are treated as a distribution of money and are not included in the partner's gross income. Efile tax calculator Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are deductible by the partnership and includible in the partner's gross income. Efile tax calculator In both situations, the partner can deduct the contribution made to the partner's HSA. Efile tax calculator Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are deductible by the S corporation and includible in the shareholder-employee's gross income. Efile tax calculator The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Efile tax calculator Form 8889. Efile tax calculator   Report all contributions to your HSA on Form 8889 and file it with your Form 1040 or Form 1040NR. Efile tax calculator You should include all contributions made for 2013, including those made by April 15, 2014, that are designated for 2013. Efile tax calculator Contributions made by your employer and qualified HSA funding distributions are also shown on the form. Efile tax calculator   You should receive Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, from the trustee showing the amount contributed to your HSA during the year. Efile tax calculator Your employer's contributions also will be shown in box 12 of Form W-2, Wage and Tax Statement, with code W. Efile tax calculator Follow the instructions for Form 8889. Efile tax calculator Report your HSA deduction on Form 1040 or Form 1040NR. Efile tax calculator Excess contributions. Efile tax calculator   You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Efile tax calculator Excess contributions are not deductible. Efile tax calculator Excess contributions made by your employer are included in your gross income. Efile tax calculator If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. Efile tax calculator   Generally, you must pay a 6% excise tax on excess contributions. Efile tax calculator See Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Efile tax calculator The excise tax applies to each tax year the excess contribution remains in the account. Efile tax calculator   You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions. Efile tax calculator You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. Efile tax calculator You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. Efile tax calculator If you fail to remain an eligible individual during any of the testing periods, discussed earlier, the amount you have to include in income is not an excess contribution. Efile tax calculator If you withdraw any of those amounts, the amount is treated the same as any other distribution from an HSA, discussed later. Efile tax calculator Deducting an excess contribution in a later year. Efile tax calculator   You may be able to deduct excess contributions for previous years that are still in your HSA. Efile tax calculator The excess contribution you can deduct for the current year is the lesser of the following two amounts. Efile tax calculator Your maximum HSA contribution limit for the year minus any amounts contributed to your HSA for the year. Efile tax calculator The total excess contributions in your HSA at the beginning of the year. Efile tax calculator   Amounts contributed for the year include contributions by you, your employer, and any other person. Efile tax calculator They also include any qualified HSA funding distribution made to your HSA. Efile tax calculator Any excess contribution remaining at the end of a tax year is subject to the excise tax. Efile tax calculator See Form 5329. Efile tax calculator Distributions From an HSA You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. Efile tax calculator When you pay medical expenses during the year that are not reimbursed by your HDHP, you can ask the trustee of your HSA to send you a distribution from your HSA. Efile tax calculator You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. Efile tax calculator If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. Efile tax calculator You do not have to make distributions from your HSA each year. Efile tax calculator If you are no longer an eligible individual, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Efile tax calculator Generally, a distribution is money you get from your health savings account. Efile tax calculator Your total distributions include amounts paid with a debit card that restricts payments to health care and amounts withdrawn from the HSA by other individuals that you have designated. Efile tax calculator The trustee will report any distribution to you and the IRS on Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Efile tax calculator Qualified medical expenses. Efile tax calculator   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Efile tax calculator These are explained in Publication 502, Medical and Dental Expenses. Efile tax calculator   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for HSA purposes. Efile tax calculator A medicine or drug will be a qualified medical expense for HSA purposes only if the medicine or drug: 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. Efile tax calculator   For HSA purposes, expenses incurred before you establish your HSA are not qualified medical expenses. Efile tax calculator State law determines when an HSA is established. Efile tax calculator An HSA that is funded by amounts rolled over from an Archer MSA or another HSA is established on the date the prior account was established. Efile tax calculator   If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified medical expenses. Efile tax calculator   Qualified medical expenses are those incurred by the following persons. Efile tax calculator You and your spouse. Efile tax calculator All dependents you claim on your tax return. Efile tax calculator Any person you could have claimed as a dependent on your return except that: The person filed a joint return, The person had gross income of $3,900 or more, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Efile tax calculator    For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child's exemption. Efile tax calculator You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your HSA. Efile tax calculator Insurance premiums. Efile tax calculator   You cannot treat insurance premiums as qualified medical expenses unless the premiums are for: Long-term care insurance. Efile tax calculator Health care continuation coverage (such as coverage under COBRA). Efile tax calculator Health care coverage while receiving unemployment compensation under federal or state law. Efile tax calculator Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap). Efile tax calculator   The premiums for long-term care insurance (item (1)) that you can treat as qualified medical expenses are subject to limits based on age and are adjusted annually. Efile tax calculator See Limit on long-term care premiums you can deduct in the instructions for Schedule A (Form 1040). Efile tax calculator   Items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. Efile tax calculator For item (4), if you, the account beneficiary, are not 65 or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) generally are not qualified medical expenses. Efile tax calculator Health coverage tax credit. Efile tax calculator   You cannot claim this credit for premiums that you pay with a tax-free distribution from your HSA. Efile tax calculator See Publication 502 for more information on this credit. Efile tax calculator Deemed distributions from HSAs. Efile tax calculator   The following situations result in deemed taxable distributions from your HSA. Efile tax calculator You engaged in any transaction prohibited by section 4975 with respect to any of your HSAs, at any time in 2013. Efile tax calculator Your account ceases to be an HSA as of January 1, 2013, and you must include the fair market value of all assets in the account as of January 1, 2013, on Form 8889. Efile tax calculator You used any portion of any of your HSAs as security for a loan at any time in 2013. Efile tax calculator You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Efile tax calculator   Examples of prohibited transactions include the direct or indirect: Sale, exchange, or leasing of property between you and the HSA, Lending of money between you and the HSA, Furnishing goods, services, or facilities between you and the HSA, and Transfer to or use by you, or for your benefit, of any assets of the HSA. Efile tax calculator   Any deemed distribution will not be treated as used to pay qualified medical expenses. Efile tax calculator These distributions are included in your income and are subject to the additional 20% tax, discussed later. Efile tax calculator Recordkeeping. Efile tax calculator You must keep records sufficient to show that: The distributions were exclusively to pay or reimburse qualified medical expenses, The qualified medical expenses had not been previously paid or reimbursed from another source, and The medical expenses had not been taken as an itemized deduction in any year. Efile tax calculator Do not send these records with your tax return. Efile tax calculator Keep them with your tax records. Efile tax calculator Reporting Distributions on Your Return How you report your distributions depends on whether or not you use the distribution for qualified medical expenses (defined earlier). Efile tax calculator If you use a distribution from your HSA for qualified medical expenses, you do not pay tax on the distribution but you have to report the distribution on Form 8889. Efile tax calculator However, the distribution of an excess contribution taken out after the due date, including extensions, of your return is subject to tax even if used for qualified medical expenses. Efile tax calculator Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Efile tax calculator If you do not use a distribution from your HSA for qualified medical expenses, you must pay tax on the distribution. Efile tax calculator Report the amount on Form 8889 and file it with your Form 1040 or Form 1040NR. Efile tax calculator You may have to pay an additional 20% tax on your taxable distribution. Efile tax calculator HSA administration and maintenance fees withdrawn by the trustee are not reported as distributions from the HSA. Efile tax calculator Additional tax. Efile tax calculator   There is an additional 20% tax on the part of your distributions not used for qualified medical expenses. Efile tax calculator Figure the tax on Form 8889 and file it with your Form 1040 or Form 1040NR. Efile tax calculator Exceptions. Efile tax calculator   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Efile tax calculator Balance in an HSA An HSA is generally exempt from tax. Efile tax calculator You are permitted to take a distribution from your HSA at any time; however, only those amounts used exclusively to pay for qualified medical expenses are tax free. Efile tax calculator Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Efile tax calculator Earnings on amounts in an HSA are not included in your income while held in the HSA. Efile tax calculator Death of HSA Holder You should choose a beneficiary when you set up your HSA. Efile tax calculator What happens to that HSA when you die depends on whom you designate as the beneficiary. Efile tax calculator Spouse is the designated beneficiary. Efile tax calculator   If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse's HSA after your death. Efile tax calculator Spouse is not the designated beneficiary. Efile tax calculator   If your spouse is not the designated beneficiary of your HSA: The account stops being an HSA, and The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die. Efile tax calculator If your estate is the beneficiary, the value is included on your final income tax return. Efile tax calculator The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death. Efile tax calculator Filing Form 8889 You must file Form 8889 with your Form 1040 or Form 1040NR if you (or your spouse, if married filing a joint return) had any activity in your HSA during the year. Efile tax calculator You must file the form even if only your employer or your spouse's employer made contributions to the HSA. Efile tax calculator If, during the tax year, you are the beneficiary of two or more HSAs or you are a beneficiary of an HSA and you have your own HSA, you must complete a separate Form 8889 for each HSA. Efile tax calculator Enter “statement” at the top of each Form 8889 and complete the form as instructed. Efile tax calculator Next, complete a controlling Form 8889 combining the amounts shown on each of the statement Forms 8889. Efile tax calculator Attach the statements to your tax return after the controlling Form 8889. Efile tax calculator Employer Participation This section contains the rules that employers must follow if they decide to make HSAs available to their employees. Efile tax calculator Unlike the previous discussions, “you” refers to the employer and not to the employee. Efile tax calculator Health plan. Efile tax calculator   If you want your employees to be able to have an HSA, they must have an HDHP. Efile tax calculator You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Efile tax calculator Contributions. Efile tax calculator   You can make contributions to your employees' HSAs. Efile tax calculator You deduct the contributions on your business income tax return for the year in which you make the contributions. Efile tax calculator If the contribution is allocated to the prior year, you still deduct it in the year in which you made the contribution. Efile tax calculator   For more information on employer contributions, see Notice 2008-59, 2008-29 I. Efile tax calculator R. Efile tax calculator B. Efile tax calculator 123, questions 23 through 27, available at www. Efile tax calculator irs. Efile tax calculator gov/irb/2008-29_IRB/ar11. Efile tax calculator html. Efile tax calculator Comparable contributions. Efile tax calculator   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' HSAs. Efile tax calculator Your contributions are comparable if they are either: The same amount, or The same percentage of the annual deductible limit under the HDHP covering the employees. Efile tax calculator The comparability rules do not apply to contributions made through a cafeteria plan. Efile tax calculator Comparable participating employees. Efile tax calculator   Comparable participating 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). Efile tax calculator   To meet the comparability requirements for eligible employees who have not established an HSA by December 31 or have not notified you that they have an HSA, you must meet a notice requirement and a contribution requirement. Efile tax calculator   You will meet the notice requirement if by January 15 of the following calendar year you provide a written notice to all such employees. Efile tax calculator The notice must state that each eligible employee who, by the last day of February, establishes an HSA and notifies you that they have established an HSA will receive a comparable contribution to the HSA for the prior year. Efile tax calculator For a sample of the notice, see Regulation 54. Efile tax calculator 4980G-4 A-14(c). Efile tax calculator You will meet the contribution requirement for these employees if by April 15, 2014, you contribute comparable amounts plus reasonable interest to the employee's HSA for the prior year. Efile tax calculator Note. Efile tax calculator For purposes of making contributions to HSAs of non-highly compensated employees, highly compensated employees shall not be treated as comparable participating employees. Efile tax calculator Excise tax. Efile tax calculator   If you made contributions to your employees' HSAs that were not comparable, you must pay an excise tax of 35% of the amount you contributed. Efile tax calculator Employment taxes. Efile tax calculator   Amounts you contribute to your employees' HSAs are generally not subject to employment taxes. Efile tax calculator You must report the contributions in box 12 of the Form W-2 you file for each employee. Efile tax calculator This includes the amounts the employee elected to contribute through a cafeteria plan. Efile tax calculator Enter code “W” in box 12. Efile tax calculator Medical Savings Accounts (MSAs) Archer MSAs were created to help self-employed individuals and employees of certain small employers meet the medical care costs of the account holder, the account holder's spouse, or the account holder's dependent(s). Efile tax calculator After December 31, 2007, you cannot be treated as an eligible individual for Archer MSA purposes unless: You were an active participant for any tax year ending before January 1, 2008, or You became an active participant for a tax year ending after December 31, 2007, by reason of coverage under a high deductible health plan (HDHP) of an Archer MSA participating employer. Efile tax calculator A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is eligible for Medicare. Efile tax calculator Archer MSAs An Archer MSA is a tax-exempt trust or custodial account that you set up with a U. Efile tax calculator S. Efile tax calculator financial institution (such as a bank or an insurance company) in which you can save money exclusively for future medical expenses. Efile tax calculator What are the benefits of an Archer MSA?   You may enjoy several benefits from having an Archer MSA. Efile tax calculator You can claim a tax deduction for contributions you make even if you do not itemize your deductions on Form 1040 or Form 1040NR. Efile tax calculator The interest or other earnings on the assets in your Archer MSA are tax free. Efile tax calculator Distributions may be tax free if you pay qualified medical expenses. Efile tax calculator See Qualified medical expenses , later. Efile tax calculator The contributions remain in your Archer MSA from year to year until you use them. Efile tax calculator An Archer MSA is “portable” so it stays with you if you change employers or leave the work force. Efile tax calculator Qualifying for an Archer MSA To qualify for an Archer MSA, you must be either of the following. Efile tax calculator An employee (or the spouse of an employee) of a small employer (defined later) that maintains a self-only or family HDHP for you (or your spouse). Efile tax calculator A self-employed person (or the spouse of a self-employed person) who maintains a self-only or family HDHP. Efile tax calculator You can have no other health or Medicare coverage except what is permitted under Other health coverage , later. Efile tax calculator You must be an eligible individual on the first day of a given month to get an Archer MSA deduction for that month. Efile tax calculator If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an Archer MSA contribution. Efile tax calculator This is true even if the other person does not actually claim your exemption. Efile tax calculator Small employer. Efile tax calculator   A small employer is generally an employer who had an average of 50 or fewer employees during either of the last 2 calendar years. Efile tax calculator The definition of small employer is modified for new employers and growing employers. Efile tax calculator Growing employer. Efile tax calculator   A small employer may begin HDHPs and Archer MSAs for his or her employees and then grow beyond 50 employees. Efile tax calculator The employer will continue to meet the requirement for small employers if he or she: 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 200 or fewer employees each year after 1996. Efile tax calculator Changing employers. Efile tax calculator   If you change employers, your Archer MSA moves with you. Efile tax calculator However, you may not make additional contributions unless you are otherwise eligible. Efile tax calculator High deductible health plan (HDHP). Efile tax calculator   To be eligible for an Archer MSA, you must be covered under an HDHP. Efile tax calculator An HDHP has: 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. Efile tax calculator Limits. Efile tax calculator   The following table shows the limits for annual deductibles and the maximum out-of-pocket expenses for HDHPs for 2013. Efile tax calculator   Self-only coverage Family coverage Minimum annual deductible $2,150 $4,300 Maximum annual deductible $3,200 $6,450 Maximum annual out-of-pocket expenses $4,300 $7,850 Family plans that do not meet the high deductible rules. Efile tax calculator   There are some family plans that have deductibles for both the family as a whole and for individual family members. Efile tax calculator Under these plans, if you meet the individual deductible for one family member, you do not have to meet the higher annual deductible amount for the family. Efile tax calculator If either the deductible for the family as a whole or the deductible for an individual family member is less than the minimum annual deductible for family coverage, the plan does not qualify as an HDHP. Efile tax calculator Example. Efile tax calculator You have family health insurance coverage in 2013. Efile tax calculator The annual deductible for the family plan is $5,500. Efile tax calculator This plan also has an individual deductible of $2,000 for each family member. Efile tax calculator The plan does not qualify as an HDHP because the deductible for an individual family member is less than the minimum annual deductible ($4,300) for family coverage. Efile tax calculator Other health coverage. Efile tax calculator   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Efile tax calculator However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Efile tax calculator However, you can have additional insurance that provides benefits only for the following items. Efile tax calculator Liabilities incurred under workers' compensation laws, torts, or ownership or use of property. Efile tax calculator A specific disease or illness. Efile tax calculator A fixed amount per day (or other period) of hospitalization. Efile tax calculator You can also have coverage (whether provided through insurance or otherwise) for the following items. Efile tax calculator Accidents. Efile tax calculator Disability. Efile tax calculator Dental care. Efile tax calculator Vision care. Efile tax calculator Long-term care. Efile tax calculator Contributions to an MSA Contributions to an Archer MSA must be made in cash. Efile tax calculator You cannot contribute stock or other property to an Archer MSA. Efile tax calculator Who can contribute to my Archer MSA?   If you are an employee, your employer may make contributions to your Archer MSA. Efile tax calculator (You do not pay tax on these contributions. Efile tax calculator ) If your employer does not make contributions to your Archer MSA, or you are self-employed, you can make your own contributions to your Archer MSA. Efile tax calculator Both you and your employer cannot make contributions to your Archer MSA in the same year. Efile tax calculator You do not have to make contributions to your Archer MSA every year. Efile tax calculator    If your spouse is covered by your HDHP and an excludable amount is contributed by your spouse's employer to an Archer MSA belonging to your spouse, you cannot make contributions to your own Archer MSA that year. Efile tax calculator Limits There are two limits on the amount you or your employer can contribute to your Archer MSA: The annual deductible limit. Efile tax calculator An income limit. Efile tax calculator Annual deductible limit. Efile tax calculator   You (or your employer) can contribute up to 75% of the annual deductible of your HDHP (65% if you have a self-only plan) to your Archer MSA. Efile tax calculator You must have the HDHP all year to contribute the full amount. Efile tax calculator If you do not qualify to contribute the full amount for the year, determine your annual deductible limit by using the worksheet in the Instructions for Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Efile tax calculator Example 1. Efile tax calculator You have an HDHP for your family all year in 2013. Efile tax calculator The annual deductible is $5,000. Efile tax calculator You can contribute up to $3,750 ($5,000 × 75%) to your Archer MSA for the year. Efile tax calculator Example 2. Efile tax calculator You have an HDHP for your family for the entire months of July through December 2013 (6 months). Efile tax calculator The annual deductible is $5,000. Efile tax calculator You can contribute up to $1,875 ($5,000 × 75% ÷ 12 × 6) to your Archer MSA for the year. Efile tax calculator If you and your spouse each have a family plan, you are treated as having family coverage with the lower annual deductible of the two health plans. Efile tax calculator The contribution limit is split equally between you unless you agree on a different division. Efile tax calculator Income limit. Efile tax calculator   You cannot contribute more than you earned for the year from the employer through whom you have your HDHP. Efile tax calculator   If you are self-employed, you cannot contribute more than your net self-employment income. Efile tax calculator This is your income from self-employment minus expenses (including the deductible part of self-employment tax). Efile tax calculator Example 1. Efile tax calculator Noah Paul earned $25,000 from ABC Company in 2013. Efile tax calculator Through ABC, he had an HDHP for his family for the entire year. Efile tax calculator The annual deductible was $5,000. Efile tax calculator He can contribute up to $3,750 to his Archer MSA (75% × $5,000). Efile tax calculator He can contribute the full amount because he earned more than $3,750 at ABC. Efile tax calculator Example 2. Efile tax calculator Westley Lawrence is self-employed. Efile tax calculator He had an HDHP for his family for the entire year in 2013. Efile tax calculator The annual deductible was $5,000. Efile tax calculator Based on the annual deductible, the maximum contribution to his Archer MSA would have been $3,750 (75% × $5,000). Efile tax calculator However, after deducting his business expenses, Joe's net self-employment income is $2,500 for the year. Efile tax calculator Therefore, he is limited to a contribution of $2,500. Efile tax calculator Individuals enrolled in Medicare. Efile tax calculator   Beginning with the first month you are enrolled in Medicare, you cannot contribute to an Archer MSA. Efile tax calculator However, you may be eligible for a Medicare Advantage MSA, discussed later. Efile tax calculator When To Contribute You can make contributions to your Archer MSA for 2013 until April 15, 2014. Efile tax calculator Reporting Contributions on Your Return Report all contributions to your Archer MSA on Form 8853 and file it with your Form 1040 or Form 1040NR. Efile tax calculator You should include all contributions you, or your employer, made for 2013, including those made by April 15, 2014, that are designated for 2013. Efile tax calculator You should receive Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, from the trustee showing the amount you (or your employer) contributed during the year. Efile tax calculator Your employer's contributions should be shown in box 12 of Form W-2, Wage and Tax Statement, with code R. Efile tax calculator Follow the instructions for Form 8853 and complete the worksheet in the instructions. Efile tax calculator Report your Archer MSA deduction on Form 1040 or Form 1040NR. Efile tax calculator Excess contributions. Efile tax calculator   You will have excess contributions if the contributions to your Archer MSA for the year are greater than the limits discussed earlier. Efile tax calculator Excess contributions are not deductible. Efile tax calculator Excess contributions made by your employer are included in your gross income. Efile tax calculator If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. Efile tax calculator   Generally, you must pay a 6% excise tax on excess contributions. Efile tax calculator See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Efile tax calculator The excise tax applies to each tax year the excess contribution remains in the account. Efile tax calculator   You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions. Efile tax calculator You withdraw the excess contributions by the due date, including extensions, of your tax return. Efile tax calculator You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. Efile tax calculator Deducting an excess contribution in a later year. Efile tax calculator   You may be able to deduct excess contributions for previous years that are still in your Archer MSA. Efile tax calculator The excess contribution you can deduct in the current year is the lesser of the following two amounts. Efile tax calculator Your maximum Archer MSA contribution limit for the year minus any amounts contributed to your Archer MSA for the year. Efile tax calculator The total excess contributions in your Archer MSA at the beginning of the year. Efile tax calculator   Any excess contributions remaining at the end of a tax year are subject to the excise tax. Efile tax calculator See Form 5329. Efile tax calculator Distributions From an MSA You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. Efile tax calculator When you pay medical expenses during the year that are not reimbursed by your HDHP, you can ask the trustee of your Archer MSA to send you a distribution from your Archer MSA. Efile tax calculator You can receive tax-free distributions from your Archer MSA to pay for qualified medical expenses (discussed later). Efile tax calculator If you receive distributions for other reasons, the amount will be subject to income tax and may be subject to an additional 20% tax as well. Efile tax calculator You do not have to make withdrawals from your Archer MSA each year. Efile tax calculator If you no longer qualify to make contributions, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Efile tax calculator A distribution is money you get from your Archer MSA. Efile tax calculator The trustee will report any distribution to you and the IRS on Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Efile tax calculator Qualified medical expenses. Efile tax calculator   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Efile tax calculator These are explained in Publication 502. Efile tax calculator   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for MSA purposes. Efile tax calculator A medicine or drug will be a qualified medical expense for MSA purposes only if the medicine or drug: 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. Efile tax calculator   Qualified medical expenses are those incurred by the following persons. Efile tax calculator You and your spouse. Efile tax calculator All dependents you claim on your tax return. Efile tax calculator Any person you could have claimed as a dependent on your return except that: The person filed a joint return, The person had gross income of $3,900 or more, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Efile tax calculator    For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child's exemption. Efile tax calculator    You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your Archer MSA. Efile tax calculator Special rules for insurance premiums. Efile tax calculator   Generally, you cannot treat insurance premiums as qualified medical expenses for Archer MSAs. Efile tax calculator You can, however, treat premiums for long-term care coverage, health care coverage while you receive unemployment benefits, or health care continuation coverage required under any federal law as qualified medical expenses for Archer MSAs. Efile tax calculator Health coverage tax credit. Efile tax calculator   You cannot claim this credit for premiums that you pay with a tax-free distribution from your Archer MSA. Efile tax calculator See Publication 502 for information on this credit. Efile tax calculator Deemed distributions from Archer MSAs. Efile tax calculator   The following situations result in deemed taxable distributions from your Archer MSA. Efile tax calculator You engaged in any transaction prohibited by section 4975 with respect to any of your Archer MSAs at any time in 2013. Efile tax calculator Your account ceases to be an Archer MSA as of January 1, 2013, and you must include the fair market value of all assets in the account as of January 1, 2013, on Form 8853. Efile tax calculator You used any portion of any of your Archer MSAs as security for a loan at any time in 2013. Efile tax calculator You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Efile tax calculator   Examples of prohibited transactions include the direct or indirect: Sale, exchange, or leasing of property between you and the Archer MSA, Lending of money 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. Efile tax calculator   Any deemed distribution will not be treated as used to pay qualified medical expenses. Efile tax calculator These distributions are included in your income and are subject to the additional 20% tax, discussed later. Efile tax calculator Recordkeeping. Efile tax calculator You must keep records sufficient to show that: The distributions were exclusively to pay or reimburse qualified medical expenses, The qualified medical expenses had not been previously paid or reimbursed from another source, and The medical expenses had not been taken as an itemized deduction in any year. Efile tax calculator Do not send these records with your tax return. Efile tax calculator Keep them with your tax records. Efile tax calculator Reporting Distributions on Your Return How you report your distributions depends on whether or not you use the distribution for qualified medical expenses (defined earlier). Efile tax calculator If you use a distribution from your Archer MSA for qualified medical expenses, you do not pay tax on the distribution but you have to report the distribution on Form 8853. Efile tax calculator Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Efile tax calculator If you do not use a distribution from your Archer MSA for qualified medical expenses, you must pay tax on the distribution. Efile tax calculator Report the amount on Form 8853 and file it with your Form 1040 or Form 1040NR. Efile tax calculator You may have to pay an additional 20% tax, discussed later, on your taxable distribution. Efile tax calculator If an amount (other than a rollover) is contributed to your Archer MSA this year (by you or your employer), you also must report and pay tax on a distribution you receive from your Archer MSA this year that is used to pay medical expenses of someone who is not covered by an HDHP, or is also covered by another health plan that is not an HDHP, at the time the expenses are incurred. Efile tax calculator Rollovers. Efile tax calculator   Generally, any distribution from an Archer MSA that you roll over into another Archer MSA or an HSA is not taxable if you complete the rollover within 60 days. Efile tax calculator An Archer MSA and an HSA can only receive one rollover contribution during a 1-year period. Efile tax calculator See the Form 8853 instructions for more information. Efile tax calculator Additional tax. Efile tax calculator   There is a 20% additional tax on the part of your distributions not used for qualified medical expenses. Efile tax calculator Figure the tax on Form 8853 and file it with your Form 1040 or Form 1040NR. Efile tax calculator Report the additional tax in the total on Form 1040 or Form 1040NR. Efile tax calculator Exceptions. Efile tax calculator   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Efile tax calculator Balance in an Archer MSA An Archer MSA is generally exempt from tax. Efile tax calculator 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. Efile tax calculator Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Efile tax calculator Earnings on amounts in an Archer MSA are not included in your income while held in the Archer MSA. Efile tax calculator Death of the Archer MSA Holder You should choose a beneficiary when you set up your Archer MSA. Efile tax calculator What happens to that Archer MSA when you die depends on whom you designate as the beneficiary. Efile tax calculator Spouse is the designated beneficiary. Efile tax calculator   If your spouse is the designated beneficiary of your Archer MSA, it will be treated as your spouse's Archer MSA after your death. Efile tax calculator Spouse is not the designated beneficiary. Efile tax calculator   If your spouse is not the designated beneficiary of your Archer MSA: The account stops being an Archer MSA, and The fair market value of the Archer MSA becomes taxable to the beneficiary in the year in which you die. Efile tax calculator   If your estate is the beneficiary, the fair market value of the Archer MSA will be included on your final income tax return. Efile tax calculator The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death. Efile tax calculator Filing Form 8853 You must file Form 8853 with your Form 1040 or Form 1040NR if you (or your spouse, if married filing a joint return) had any activity in your Archer MSA during the year. Efile tax calculator You must file the form even if only your employer or your spouse's employer made contributions to the Archer MSA. Efile tax calculator If, during the tax year, you are the beneficiary of two or more Archer MSAs or you are a beneficiary of an Archer MSA and you have your own Archer MSA, you must complete a separate Form 8853 for each MSA. Efile tax calculator Enter “statement” at the top of each Form 8853 and complete the form as instructed. Efile tax calculator Next, complete a controlling Form 8853 combining the amounts shown on each of the statement Forms 8853. Efile tax calculator Attach the statements to your tax return after the controlling Form 8853. Efile tax calculator Employer Participation This section contains the rules that employers must follow if they decide to make Archer MSAs available to their employees. Efile tax calculator Unlike the previous discussions, “you” refers to the employer and not to the employee. Efile tax calculator Health plan. Efile tax calculator   If you want your employees to be able to have an Archer MSA, you must make an HDHP available to them. Efile tax calculator You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Efile tax calculator Contributions. Efile tax calculator   You can make contributions to your employees' Archer MSAs. Efile tax calculator You deduct the contributions on the “Employee benefit programs” line of your business income tax return for the year in which you make the contributions. Efile tax calculator If you are filing Form 1040, Schedule C, this is Part II, line 14. Efile tax calculator Comparable contributions. Efile tax calculator   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' Archer MSAs. Efile tax calculator Your contributions are comparable if they are either: The same amount, or The same percentage of the annual deductible limit under the HDHP covering the employees. Efile tax calculator Comparable participating employees. Efile tax calculator   Comparable participating employees: 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). Efile tax calculator Excise tax. Efile tax calculator   If you made contributions to your employees' Archer MSAs that were not comparable, you must pay an excise tax of 35% of the amount you contributed. Efile tax calculator Employment taxes. Efile tax calculator   Amounts you contribute to your employees' Archer MSAs are generally not subject to employment taxes. Efile tax calculator You must report the contributions in box 12 of the Form W-2 you file for each employee. Efile tax calculator Enter code “R” in box 12. Efile tax calculator Medicare Advantage MSAs A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. Efile tax calculator To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare and have a high deductible health plan (HDHP) that meets the Medicare guidelines. Efile tax calculator 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. Efile tax calculator The money in your account is not taxed if it is used for qualified medical expenses, and it may earn interest or dividends. Efile tax calculator An HDHP is a special health insurance policy that has a high deductible. Efile tax calculator You choose the policy you want to use as part of your Medicare Advantage MSA plan. Efile tax calculator However, the policy must be approved by the Medicare program. Efile tax calculator Medicare Advantage MSAs are administered through the federal Medicare program. Efile tax calculator You can get information by calling 1-800-Medicare (1-800-633-4227) or through the Internet at www. Efile tax calculator medicare. Efile tax calculator gov. Efile tax calculator Note. Efile tax calculator You must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your tax return if you have a Medicare Advantage MSA. Efile tax calculator Flexible Spending Arrangements (FSAs) A health flexible spending arrangement (FSA) allows employees to be reimbursed for medical expenses. Efile tax calculator FSAs are usually funded through voluntary salary reduction agreements with your employer. Efile tax calculator No employment or federal income taxes are deducted from your contribution. Efile tax calculator The employer may also contribute. Efile tax calculator Note. Efile tax calculator Unlike HSAs or Archer MSAs which must be reported on Form 1040 or Form 1040NR, there are no reporting requirements for FSAs on your income tax return. Efile tax calculator For information on the interaction between a health FSA and an HSA, see Other employee health plans under Qualifying for an HSA, earlier. Efile tax calculator What are the benefits of an FSA?   You may enjoy several benefits from having an FSA. Efile tax calculator Contributions made by your employer can be excluded from your gross income. Efile tax calculator No employment or federal income taxes are deducted from the contributions. Efile tax calculator Withdrawals may be tax free if you pay qualified medical expenses. Efile tax calculator See Qualified medical expenses , later. Efile tax calculator You can withdraw funds from the account to pay qualified medical expenses even if you have not yet placed the funds in the account. Efile tax calculator Qualifying for an FSA Health FSAs are employer-established benefit plans. Efile tax calculator These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan. Efile tax calculator Employers have complete flexibility to offer various combinations of benefits in designing their plan. Efile tax calculator You do not have to be covered under any other health care plan to participate. Efile tax calculator Self-employed persons are not eligible for an FSA. Efile tax calculator Certain limitations may apply if you are a highly compensated participant or a key employee. Efile tax calculator Contributions to an FSA You contribute to your FSA by electing an amount to be voluntarily withheld from your pay by your employer. Efile tax calculator This is sometimes called a salary reduction agreement. Efile tax calculator The employer may also contribute to your FSA if specified in the plan. Efile tax calculator You do not pay federal income tax or employment taxes on the salary you contribute or the amounts your employer contributes to the FSA. Efile tax calculator However, contributions made by your employer to provide coverage for long-term care insurance must be included in income. Efile tax calculator When To Contribute At the