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The following new rules apply for 2007.
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Your contributions to your HSA are no longer limited to your annual health plan deductible.
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If you are an eligible individual on the first day of the last month of your tax year, you are treated as being an eligible individual for the entire tax year for purposes of figuring the amount you can contribute to your HSA.
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If you are not a highly compensated employee, your employer does not have to take into account a highly compensated employee in determining who is a comparable participating employee for making contributions to HSAs.
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You may be able to exclude from your gross income a one-time qualified HSA funding distribution from your individual retirement account.
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You may be able to request your employer make a one-time transfer of the balance in your health FSA or HRA to your HSA.
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Medicare Advantage MSAs have been approved by the Medicare Program.
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Form 8889, Part III. In Part III of Form 8889, Health Savings Accounts (HSAs), you figure the 10% additional tax that is due to your failure to remain an eligible individual during the testing periods discussed under Health Savings Accounts (HSAs). Form 8889 instructs you to report this tax on Form 1040, line 44, or on Form 1040NR, line 41, using checkbox “c.” However, due to late tax law changes, the tax must instead be included on Form 1040, line 63, or on Form 1040NR, line 58, as an additional write-in tax. On the dotted line next to Form 1040, line 63, or Form 1040NR, line 58, enter “HDHP” and the amount of this tax.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 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.
Various programs are designed to give individuals tax advantages to offset health care costs. This publication explains the following programs.
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Health savings accounts (HSAs).
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Medical savings accounts (Archer MSAs and Medicare Advantage MSAs).
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Health flexible spending arrangements (FSAs).
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Health reimbursement arrangements (HRAs).
An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. Contributions, other than employer contributions, are deductible on the eligible individual's return whether or not the individual itemizes deductions. Employer contributions are not included in income. Distributions from an HSA that are used to pay qualified medical expenses are not taxed.
An Archer MSA may receive contributions from an eligible individual and his or her employer, but not both in the same year. Contributions by the individual are deductible whether or not the individual itemizes deductions. Employer contributions are not included in income. Distributions from an Archer MSA that are used to pay qualified medical expenses are not taxed.
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 enrolled in Medicare. Contributions can only be made by Medicare. The contributions are not included in your income. Distributions from a Medicare Advantage MSA that are used to pay qualified medical expenses are not taxed.
A health FSA may receive contributions from an eligible individual. Employers may also contribute. Contributions are not includible in income. Reimbursements from an FSA that are used to pay qualified medical expenses are not taxed.
An HRA must receive contributions from the employer only. Employees may not contribute. Contributions are not includible in income. Reimbursements from an HRA that are used to pay qualified medical expenses are not taxed.
Internal Revenue Service
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