FREE NEWSLETTER
Go to main Forum page »
I appreciated the HD community’s responses to my November 2024 post regarding the decision to use either Roth or HSA (health savings account) funds to bridge some of my income needs until I receive SS benefits at age 70. You swayed me first to use my HSA funds. I have several years of medical receipts exceeding the low five-digit account balance, so they will carry me through most of the “bridge” period.
With that decision, I realized that I could also use my HSA funds to leverage a federal Savers tax credit on my 2026 tax return. I expect to have earned income that will potentially nab me up to $2,000 in tax savings on a jointly filed return. Why wait until 2026? Well, there is a three-year look-back period on any qualified retirement fund withdrawals that make me ineligible until 2026. However, HSA accounts aren’t considered as such even though they have better tax advantages.
Are there other ways you have used the HSA lever to reduce your tax federal taxes?
Using HSA funds or Roth withdrawals instead of a traditional IRA or 401k withdrawal, effectively reduces your taxable income, and can have many positive effects, for both federal and state taxation. Your taxable income can impact things like SS taxation, eligibility for a premium tax credit if you purchase healthcare on the marketplace, Medicare’s IRMAA premiums, your LT capital gains tax rate. Many states have income driven property tax reduction programs,
I’m a big fan of HSAs as I’ve written frequently, and have used them to our advantage for many years.
Spouse is still working part time but started SS this month and they are not quite FRA. If they earn more and we decide to have a “do over” this first year, we may use some HSA funds to help pay if needed. I have lots of receipts also. I guess that is not technically taxes like you were asking, but similar maybe. We also have other pots we can use.
The HSA has been a wonderful thing for us once I learned about how it works. Chris