IRA to HSA tax question as once in lifetime event?????
My wife is 62(retired) and myself 62(retired). My wife was stay at home mom thus she had no IRA except the ROTH IRA. If I’m too late for 2007 would I be better off doing this between 1/1/09 and 4/15/09????
In 2007 I am allowed $5650 plus (myself and wife) X $800 = $1600 +$5650 =[b]$7250 for 2007[/b].
In 2008 I am allowed $5800 plus (myself and wife) X $900 = $1800 +$5800 =[b]$7600 for 2008[/b].
Potentially if I am allowed to make once in a lifetime move of IRA to HSA it could be [b]$14850 for years 2007 & 2008 if done before 4/15/07[/b].
This would give me tax free gains on that account until Medicare kicks in at 65.
rggmaki, that is the reason I ask because I still am within the time frame to do a dual contribution as a once in a life time event.
TIA………Jack
Permalink Submitted by Alan Spross on Sat, 2008-04-12 01:46
Jack,
Unfortuneately, you cannot make a multiple year transfer from a TIRA to an HSA. Form 8889 is used to report the transfer and it will reduce your contribution FOR the year of the transfer by the amount of the transfer.
You cannot transfer for 2007 after 12/31/07 even though you could still make an HSA contribution for 2007 for another 4 days. Any transfer you make now would only be reported on your 2008 Form 8889 and would reduce only your 2008 eligible contribution, not 2007.
That means your options now are:
1) Contribute for 2007 if you are eligible per type of coverage maintained and want to contribute, but that contribution cannot be used to fund a qualified HSA funding distribution since it is now 2008.
2) Contribute for 2008 if you wish as above OR use your 2008 eligibility to instead make a funding transfer from your respective IRAs to HSAs (separate 8889 for each spouse). This would be reported on your 2008 Form 8889.
3) I do not see any value in transferring from a Roth IRA, since those funds will grow tax free without restriction for use as HSA funds would have. Any transfer should be from a tradtional IRA as this would avoid taxes on those funds.
You cannot transfer funds from one spouse’s IRA to the other spouse’s HSA. You cannot double up on the contribution for each spouse if both are covered by family coverage plans, however the max contribution can be allocated to each spouse’s HSA in any proportion of the allowable total. Therefore the allowed contribution needs to be allocated to the HSA of the spouse doing the funding transfer. You might want to consider this if your spouse only has a Roth. In other words, the spouse with the TIRA would take the contribution which would be offset by the HSA transfer.
I guess this could all be more confusing if they really worked at it.