The guidelines for Form 8889 concerning Health Savings Accounts (HSAs) for the year 2023 provides crucial information for taxpayers. For the most current information on any developments related to Form 8889 and those stemming from recent bills, please check IRS.gov/Form8889. One such change is epitomized in Notice 2023-37 that modifies the meaning of preventive care during the post-COVID-19 national state of emergency. This notice outlines that certain exceptions concerning the reimbursement of the treatment and the testing of COVID-19 under high deductible health plans (HDHPs) will apply only for plan years ending on or before December 31, 2024. In addition, as of July 24, 2023, the use of the preventive care safe harbor for COVID-19 testing under HDHPs has been discontinued, although COVID-19 testing remains a qualified medical expense with minimum deductible requirements.
FA likewise, the Consolidated Appropriations Act of 2023 has expanded access to telehealth and remote care for HSAs. From 2023 or 2024 eligible individuals will be allowed to have separate telehealth coverage in addition to their HDHP with respect to such services thereby allowing for the possible availability of zero deductibles for such services. Another important change is the Inflation Reduction Act signed into law by President Joe Biden on August 16, 2022, which enables HDHPs to have zero deductibles for certain selected insulin products beginning from the plan years of 2022.
Taxpayers seeking guidance on various qualified medical expenses can refer to the IRS website for frequently asked questions regarding costs related to nutrition, wellness, and general health. It is important to confirm with HSA trustees and health insurance providers that accounts and coverage comply with section 223 of the Internal Revenue Code.
Among eligible medical expenses are amounts spent on personal protective equipment (PPE) such as masks and hand sanitizer, which may be reimbursed from an HSA when intended to prevent COVID-19. The cost of home testing for COVID-19 is also considered an eligible medical expense, eligible for reimbursement from an HSA.
Use this form, Form 8889, for reporting contributions made towards the Health Savings Account (HSA), including contributions made by employers and those made on behalf of individuals. Also, it aids one in calculating the HSA deduction as well as in filing distributions which include amounts that should be included in income of the individual when the individual is not an eligible individual. For further information on Health Savings Accounts, please see IRS Publication 969 or the instructions for Form 1040 and Form 1040-NR.
Determine if it is necessary to File Form 8889 and in what scenario by… assessing individual circumstances. Filing is required if there were contributions to an HSA for the year, HSA distributions were taken, or certain amounts must be reported in income because eligibility was lacking during the measurement period. Such a requirement is applicable also on the situation when the individual would have obtained an HSA in the account holder’s death. In addition, if the taxpayer receives any HSA distributions, then Form 8889 must be filed with Form 1040 or any of its variations, even if the taxpayer has no taxable income.
The term ‘eligible individual’ has a very important meaning when it comes to contributions to a Health Savings Account. Individuals must be members of a and have no other form of health insurance coverage, apart from specified exceptions. Of importance, the person will not qualify as an eligible individual if he or she is on Medicare or is being claimed as a dependent. It should be noted that receiving treatment under the laws and programs of the Department of Veterans Affairs does not disqualify a person from being considered eligible. In addition, if a person is treated as an eligible individual on the first day of the last month of the tax year, he or she is treated as such for the whole tax year as long as he or she is eligible within the period defined as from the last month of the tax year until the end of the following year.
Medically necessary costs mainly consist of unreimbursed out-of-pocket expenses that may be claimed on Schedule A of Form 1040. HSA account holders may also pay for qualifying health expenses incurred by their spouse and dependents. This includes not limited to, the purchase of feminine hygiene products and over-the-counter medicinal products like insulin. It should be noted that expenses prior to opening an HSA, in this case, are also excluded from being treated as qualified expenses. However, premiums for insurances shall qualify only if they relate to long-term insurance cover, COBRA cover or Medicare for insured persons who are aged 65 years and above.
To be considered a qualifying HDHP, a health insurance plan must adhere to a minimum deductible and maximum out-of-pocket limits. They are referred to as high deductible health plans in that for obvious reasons away from compulsory inclusion such services may be provisioned. Teladoc is an example a patient can use and will be covered even if lawfully the patient is asked to meet a deductible first. As a final note, the overall situation regarding HSAs and additional tax benefits for taxpayers in 2023 is quite complex and these benefits require careful navigation of the relevant criteria.
