Tackle Higher Medical Expenses and Tax Infested Traditional IRA Accounts at the Same Time! | Ed Slott and Company, LLC

Tackle Higher Medical Expenses and Tax Infested Traditional IRA Accounts at the Same Time!

In the recent Ed Slott December Newsletter article entitled, "Tackle Higher Medical Expenses and Tax Infested Traditional IRA Accounts at the Same Time!," it stated in one paragraph that the TIRA distribution to an HSA for a qualified high deductible healthcare plan (HDHP) is a one time distribution, while in another paragraph, it provided a scenario where an individual could make the same distribution annually. Could you clarify that?

I am not sure if the one time reference had to do with an individual who age was under 59 1/2, while the repeating annual scenario was for an individual between the ages of 59 1/2 to 65? In short, I will turn age 62 in January, 2017, so if I am on a HDHP with an HSA account, can I only make the distribution from the TIRA to the HSA account once up to the prescribed contribution limits, or can I make it repeatedly on an annual basis until I reach age 65?

Thank you.

A Qualified Funding Distribution is only allowed once in a lifetime.  A QFD allows one otherwise subject to an early-distribution penalty to transfer trustee-to-trustee from an IRA to an HSA an amount up to the person's HSA contribution limit tax and penalty free by not having to include it income.  For someone over age 59½ (such as you) or otherwise exempt from an early-distribution penalty for distributions from their IRAs, a QFD is unnecessary.  This person can simply take a taxable (but penalty free) distribution from the IRA (includible in income) and separately make a deductible contribution to the HSA.  The above-the-line deduction offsets the taxable income, producing the same result as a QFD without actually making a QFD.

Excellent.  Thank you sooo much for your explanation and prompt reply!  :-)

 

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.
 

I agree to the terms and services:

You may review the terms and conditions here.