HSA Facts

intro-HSAFacts

Myth: You need to pre-fund the account to get the tax break.
Fact: If the HSA was established when you had a health care expense, you can still save 25-35% payroll and income taxes by funding the account post-purchase and reimbursing yourself — even years later.
Reference: IRS Publication 969, Page 8, Column 1 (top half) http://www.irs.gov/pub/irs-pdf/p969.pdf
Myth: You can only change your payroll deduction once per year.
Fact: The IRS requires employers to allow changes at least once per month.
Reference: IRS Federal Register 2007, Page 43956, Third Column (middle half) http://edocket.access.gpo.gov/2007/pdf/E7-14827.pdf
Myth: People with single coverage can only use HSA for their own health expenses.
Fact: You can use the account to pay for health expenses of any tax dependent (i.e., spouse, children, etc.) even if they’re not on your insurance plan.
Reference: IRS Publication 969, Page 8, Column 1 (bottom half) http://www.irs.gov/pub/irs-pdf/p969.pdf.
Myth: Funding your HSA with after-tax dollars is just as good as funding it through payroll.
Fact: Funding it through payroll is much better because: (i) you save up to 7.65% FICA payroll tax in addition to income tax (payroll tax savings are lost if you take an income tax deduction instead) (ii) your savings are immediate instead of waiting for next April 15 and (iii) your employer saves up to 7.65% payroll tax too.
Reference: IRS Publication 969, Page 7, Column 1 (bottom half) http://www.irs.gov/pub/irs-pdf/p969.pdf
Myth: If you don’t have group health insurance, you can’t fund your HSA through pre-tax payroll deduction.
Fact: As long as your employer has a qualifying Section 125 plan, you can fund your HSA through pre-tax payroll deduction even if you have individual health insurance.
Reference: IRS Federal Register 2007, Page 43956, Third Column (middle) http://edocket.access.gpo.gov/2007/pdf/E7-14827.pdf
Myth: As of January 1, 2011, no over-the-counter products qualify for an HSA tax break.
Fact: The tax break only disappears for over-the-counter medicines (other than insulin) where you haven’t been prescribed the drug. Many over-the-counter medical products such as bandages, other medical devices and supplies are still HSA-qualifying. And, if your doctor writes you a prescription for an over-the-counter medicine, it still counts as tax-free. (Just keep the prescription alongside your receipts in your Tango Health HSA Vault.)
Reference: IRS Notice 2010-59, Page 2 (first half) http://www.irs.gov/pub/irs-drop/n-10-59.pdf

Reference: IRS Publication 502 (2010) – List of qualifying medical expenses http://www.irs.gov/pub/irs-pdf/p502.pdf