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Taxact 2012 Return User

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Taxact 2012 Return User

Taxact 2012 return user Publication 969 - Main Content Table of Contents Health Savings Accounts (HSAs)Qualifying for an HSA Contributions to an HSA Distributions From an HSA Balance in an HSA Death of HSA Holder Filing Form 8889 Employer Participation Medical Savings Accounts (MSAs)Archer MSAs Contributions to an MSA Distributions From an MSA Balance in an Archer MSA Death of the Archer MSA Holder Filing Form 8853 Employer Participation Medicare Advantage MSAs Flexible Spending Arrangements (FSAs)Qualifying for an FSA Contributions to an FSA Distributions From an FSA Balance in an FSA Employer Participation Health Reimbursement Arrangements (HRAs)Qualifying for an HRA Contributions to an HRA Distributions From an HRA Balance in an HRA Employer Participation How To Get Tax HelpLow Income Taxpayer Clinics Health Savings Accounts (HSAs) A health savings account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. Taxact 2012 return user You must be an eligible individual to qualify for an HSA. Taxact 2012 return user No permission or authorization from the IRS is necessary to establish an HSA. Taxact 2012 return user You set up an HSA with a trustee. Taxact 2012 return user A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. Taxact 2012 return user The HSA can be established through a trustee that is different from your health plan provider. Taxact 2012 return user Your employer may already have some information on HSA trustees in your area. Taxact 2012 return user If you have an Archer MSA, you can generally roll it over into an HSA tax free. Taxact 2012 return user See Rollovers, later. Taxact 2012 return user What are the benefits of an HSA?   You may enjoy several benefits from having an HSA. Taxact 2012 return user You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040. Taxact 2012 return user Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income. Taxact 2012 return user The contributions remain in your account until you use them. Taxact 2012 return user The interest or other earnings on the assets in the account are tax free. Taxact 2012 return user Distributions may be tax free if you pay qualified medical expenses. Taxact 2012 return user See Qualified medical expenses , later. Taxact 2012 return user An HSA is “portable. Taxact 2012 return user ” It stays with you if you change employers or leave the work force. Taxact 2012 return user Qualifying for an HSA To be an eligible individual and qualify for an HSA, you must meet the following requirements. Taxact 2012 return user You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month. Taxact 2012 return user You have no other health coverage except what is permitted under Other health coverage , later. Taxact 2012 return user You are not enrolled in Medicare. Taxact 2012 return user You cannot be claimed as a dependent on someone else's 2013 tax return. Taxact 2012 return user Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers). Taxact 2012 return user If you meet these requirements, you are an eligible individual even if your spouse has non-HDHP family coverage, provided your spouse's coverage does not cover you. Taxact 2012 return user If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an HSA contribution. Taxact 2012 return user This is true even if the other person does not actually claim your exemption. Taxact 2012 return user Each spouse who is an eligible individual who wants an HSA must open a separate HSA. Taxact 2012 return user You cannot have a joint HSA. Taxact 2012 return user High deductible health plan (HDHP). Taxact 2012 return user   An HDHP has: A higher annual deductible than typical health plans, and A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you must pay for covered expenses. Taxact 2012 return user Out-of-pocket expenses include copayments and other amounts, but do not include premiums. Taxact 2012 return user   An HDHP may provide preventive care benefits without a deductible or with a deductible less than the minimum annual deductible. Taxact 2012 return user Preventive care includes, but is not limited to, the following. Taxact 2012 return user Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals. Taxact 2012 return user Routine prenatal and well-child care. Taxact 2012 return user Child and adult immunizations. Taxact 2012 return user Tobacco cessation programs. Taxact 2012 return user Obesity weight-loss programs. Taxact 2012 return user Screening services. Taxact 2012 return user This includes screening services for the following: Cancer. Taxact 2012 return user Heart and vascular diseases. Taxact 2012 return user Infectious diseases. Taxact 2012 return user Mental health conditions. Taxact 2012 return user Substance abuse. Taxact 2012 return user Metabolic, nutritional, and endocrine conditions. Taxact 2012 return user Musculoskeletal disorders. Taxact 2012 return user Obstetric and gynecological conditions. Taxact 2012 return user Pediatric conditions. Taxact 2012 return user Vision and hearing disorders. Taxact 2012 return user For more information on screening services, see Notice 2004-23, 2004-15 I. Taxact 2012 return user R. Taxact 2012 return user B. Taxact 2012 return user 725 available at www. Taxact 2012 return user irs. Taxact 2012 return user gov/irb/2004-15_IRB/ar10. Taxact 2012 return user html. Taxact 2012 return user     The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2013. Taxact 2012 return user      Self-only coverage Family coverage Minimum annual deductible $1,250 $2,500 Maximum annual deductible and other out-of-pocket expenses* $6,250 $12,500 * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Taxact 2012 return user Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Taxact 2012 return user    The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2014. Taxact 2012 return user      Self-only coverage Family coverage Minimum annual deductible $1,250 $2,500 Maximum annual deductible and other out-of-pocket expenses* $6,350 $12,700 * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Taxact 2012 return user Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies. Taxact 2012 return user   Self-only HDHP coverage is an HDHP covering only an eligible individual. Taxact 2012 return user Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual). Taxact 2012 return user Example. Taxact 2012 return user An eligible individual and his dependent child are covered under an “employee plus one” HDHP offered by the individual's employer. Taxact 2012 return user This is family HDHP coverage. Taxact 2012 return user Family plans that do not meet the high deductible rules. Taxact 2012 return user   There are some family plans that have deductibles for both the family as a whole and for individual family members. Taxact 2012 return user Under these plans, if you meet the individual deductible for one family member, you do not have to meet the higher annual deductible amount for the family. Taxact 2012 return user If either the deductible for the family as a whole or the deductible for an individual family member is less than the minimum annual deductible for family coverage, the plan does not qualify as an HDHP. Taxact 2012 return user Example. Taxact 2012 return user You have family health insurance coverage in 2013. Taxact 2012 return user The annual deductible for the family plan is $3,500. Taxact 2012 return user This plan also has an individual deductible of $1,500 for each family member. Taxact 2012 return user The plan does not qualify as an HDHP because the deductible for an individual family member is less than the minimum annual deductible ($2,500) for family coverage. Taxact 2012 return user Other health coverage. Taxact 2012 return user   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Taxact 2012 return user However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Taxact 2012 return user    You can have additional insurance that provides benefits only for the following items. Taxact 2012 return user Liabilities incurred under workers' compensation laws, tort liabilities, or liabilities related to ownership or use of property. Taxact 2012 return user A specific disease or illness. Taxact 2012 return user A fixed amount per day (or other period) of hospitalization. Taxact 2012 return user   You can also have coverage (whether provided through insurance or otherwise) for the following items. Taxact 2012 return user Accidents. Taxact 2012 return user Disability. Taxact 2012 return user Dental care. Taxact 2012 return user Vision care. Taxact 2012 return user Long-term care. Taxact 2012 return user    Plans in which substantially all of the coverage is through the items listed earlier are not HDHPs. Taxact 2012 return user For example, if your plan provides coverage substantially all of which is for a specific disease or illness, the plan is not an HDHP for purposes of establishing an HSA. Taxact 2012 return user Prescription drug plans. Taxact 2012 return user   You can have a prescription drug plan, either as part of your HDHP or a separate plan (or rider), and qualify as an eligible individual if the plan does not provide benefits until the minimum annual deductible of the HDHP has been met. Taxact 2012 return user If you can receive benefits before that deductible is met, you are not an eligible individual. Taxact 2012 return user Other employee health plans. Taxact 2012 return user   An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally cannot make contributions to an HSA. Taxact 2012 return user Health FSAs and HRAs are discussed later. Taxact 2012 return user   However, an employee can make contributions to an HSA while covered under an HDHP and one or more of the following arrangements. Taxact 2012 return user Limited-purpose health FSA or HRA. Taxact 2012 return user These arrangements can pay or reimburse the items listed earlier under Other health coverage except long-term care. Taxact 2012 return user Also, these arrangements can pay or reimburse preventive care expenses because they can be paid without having to satisfy the deductible. Taxact 2012 return user Suspended HRA. Taxact 2012 return user Before the beginning of an HRA coverage period, you can elect to suspend the HRA. Taxact 2012 return user The HRA does not pay or reimburse, at any time, the medical expenses incurred during the suspension period except preventive care and items listed under Other health coverage. Taxact 2012 return user When the suspension period ends, you are no longer eligible to make contributions to an HSA. Taxact 2012 return user Post-deductible health FSA or HRA. Taxact 2012 return user These arrangements do not pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. Taxact 2012 return user The deductible for these arrangements does not have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met. Taxact 2012 return user Retirement HRA. Taxact 2012 return user This arrangement pays or reimburses only those medical expenses incurred after retirement. Taxact 2012 return user After retirement you are no longer eligible to make contributions to an HSA. Taxact 2012 return user Health FSA – grace period. Taxact 2012 return user   Coverage during a grace period by a general purpose health FSA is allowed if the balance in the health FSA at the end of its prior year plan is zero. Taxact 2012 return user See Flexible Spending Arrangements (FSAs) , later. Taxact 2012 return user Contributions to an HSA Any eligible individual can contribute to an HSA. Taxact 2012 return user For an employee's HSA, the employee, the employee's employer, or both may contribute to the employee's HSA in the same year. Taxact 2012 return user For an HSA established by a self-employed (or unemployed) individual, the individual can contribute. Taxact 2012 return user Family members or any other person may also make contributions on behalf of an eligible individual. Taxact 2012 return user Contributions to an HSA must be made in cash. Taxact 2012 return user Contributions of stock or property are not allowed. Taxact 2012 return user Limit on Contributions The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. Taxact 2012 return user For 2013, if you have self-only HDHP coverage, you can contribute up to $3,250. Taxact 2012 return user If you have family HDHP coverage, you can contribute up to $6,450. Taxact 2012 return user For 2014, if you have self-only HDHP coverage, you can contribute up to $3,300. Taxact 2012 return user If you have family HDHP coverage you can contribute up to $6,550. Taxact 2012 return user If you were, or were considered (under the last-month rule, discussed later), an eligible individual for the entire year and did not change your type of coverage, you can contribute the full amount based on your type of coverage. Taxact 2012 return user However, if you were not an eligible individual for the entire year or changed your coverage during the year, your contribution limit is the greater of: The limitation shown on the Line 3 Limitation Chart and Worksheetin the Instructions for Form 8889, Health Savings Accounts (HSAs), or The maximum annual HSA contribution based on your HDHP coverage (self-only or family) on the first day of the last month of your tax year. Taxact 2012 return user If you had family HDHP coverage on the first day of the last month of your tax year, your contribution limit for 2013 is $6,450 even if you changed coverage during the year. Taxact 2012 return user Last-month rule. Taxact 2012 return user   Under the last-month rule, if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers), you are considered an eligible individual for the entire year. Taxact 2012 return user You are treated as having the same HDHP coverage for the entire year as you had on the first day of the last month. Taxact 2012 return user Testing period. Taxact 2012 return user   If contributions were made to your HSA based on you being an eligible individual for the entire year under the last-month rule, you must remain an eligible individual during the testing period. Taxact 2012 return user For the last-month rule, the testing period begins with the last month of your tax year and ends on the last day of the 12th month following that month. Taxact 2012 return user For example, December 1, 2013, through December 31, 2014. Taxact 2012 return user   If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the total contributions made to your HSA that would not have been made except for the last-month rule. Taxact 2012 return user You include this amount in your income in the year in which you fail to be an eligible individual. Taxact 2012 return user This amount is also subject to a 10% additional tax. Taxact 2012 return user The income and additional tax are shown on Form 8889, Part III. Taxact 2012 return user Example 1. Taxact 2012 return user Chris, age 53, becomes an eligible individual on December 1, 2013. Taxact 2012 return user He has family HDHP coverage on that date. Taxact 2012 return user Under the last-month rule, he contributes $6,450 to his HSA. Taxact 2012 return user Chris fails to be an eligible individual in June 2014. Taxact 2012 return user Because Chris did not remain an eligible individual during the testing period (December 1, 2013, through December 31, 2014), he must include in his 2014 income the contributions made in 2013 that would not have been made except for the last-month rule. Taxact 2012 return user Chris uses the worksheet in the Form 8889 instructions to determine this amount. Taxact 2012 return user January -0- February -0- March -0- April -0- May -0- June -0- July -0- August -0- September -0- October -0- November -0- December $6,450. Taxact 2012 return user 00 Total for all months $6,450. Taxact 2012 return user 00 Limitation. Taxact 2012 return user Divide the total by 12 $537. Taxact 2012 return user 50 Chris would include $5,912. Taxact 2012 return user 50 ($6,450. Taxact 2012 return user 00 – $537. Taxact 2012 return user 50) in his gross income on his 2014 tax return. Taxact 2012 return user Also, a 10% additional tax applies to this amount. Taxact 2012 return user Example 2. Taxact 2012 return user Erika, age 39, has self-only HDHP coverage on January 1, 2013. Taxact 2012 return user Erika changes to family HDHP coverage on November 1, 2013. Taxact 2012 return user Because Erika has family HDHP coverage on December 1, 2013, she contributes $6,450 for 2013. Taxact 2012 return user Erika fails to be an eligible individual in March 2014. Taxact 2012 return user Because she did not remain an eligible individual during the testing period (December 1, 2013, through December 31, 2014), she must include in income the contribution made that would not have been made except for the last-month rule. Taxact 2012 return user Erika uses the worksheet in the Form 8889 instructions to determine this amount. Taxact 2012 return user January $3,250. Taxact 2012 return user 00 February $3,250. Taxact 2012 return user 00 March $3,250. Taxact 2012 return user 00 April $3,250. Taxact 2012 return user 00 May $3,250. Taxact 2012 return user 00 June $3,250. Taxact 2012 return user 00 July $3,250. Taxact 2012 return user 00 August $3,250. Taxact 2012 return user 00 September $3,250. Taxact 2012 return user 00 October $3,250. Taxact 2012 return user 00 November $6,450. Taxact 2012 return user 00 December $6,450. Taxact 2012 return user 00 Total for all months $45,400. Taxact 2012 return user 00 Limitation. Taxact 2012 return user Divide the total by 12 $3,783. Taxact 2012 return user 34 Erika would include $2,666. Taxact 2012 return user 67 ($6,450 – $3,783. Taxact 2012 return user 34) in her gross income on her 2014 tax return. Taxact 2012 return user Also, a 10% additional tax applies to this amount. Taxact 2012 return user Additional contribution. Taxact 2012 return user   If you are an eligible individual who is age 55 or older at the end of your tax year, your contribution limit is increased by $1,000. Taxact 2012 return user For example, if you have self-only coverage, you can contribute up to $4,250 (the contribution limit for self-only coverage ($3,250) plus the additional contribution of $1,000). Taxact 2012 return user However, see Enrolled in Medicare , later. Taxact 2012 return user If you have more than one HSA in 2013, your total contributions to all the HSAs cannot be more than the limits discussed earlier. Taxact 2012 return user Reduction of contribution limit. Taxact 2012 return user   You must reduce the amount that can be contributed (including any additional contribution) to your HSA by the amount of any contribution made to your Archer MSA (including employer contributions) for the year. Taxact 2012 return user A special rule applies to married people, discussed next, if each spouse has family coverage under an HDHP. Taxact 2012 return user Rules for married people. Taxact 2012 return user   If either spouse has family HDHP coverage, both spouses are treated as having family HDHP coverage. Taxact 2012 return user If each spouse has family coverage under a separate plan, the contribution limit for 2013 is $6,450. Taxact 2012 return user You must reduce the limit on contributions, before taking into account any additional contributions, by the amount contributed to both spouses' Archer MSAs. Taxact 2012 return user After that reduction, the contribution limit is split equally between the spouses unless you agree on a different division. Taxact 2012 return user The rules for married people apply only if both spouses are eligible individuals. Taxact 2012 return user If both spouses are 55 or older and not enrolled in Medicare, each spouse's contribution limit is increased by the additional contribution. Taxact 2012 return user If both spouses meet the age requirement, the total contributions under family coverage cannot be more than $8,450. Taxact 2012 return user Each spouse must make the additional contribution to his or her own HSA. Taxact 2012 return user Example. Taxact 2012 return user For 2013, Mr. Taxact 2012 return user Auburn and his wife are both eligible individuals. Taxact 2012 return user They each have family coverage under separate HDHPs. Taxact 2012 return user Mr. Taxact 2012 return user Auburn is 58 years old and Mrs. Taxact 2012 return user Auburn is 53. Taxact 2012 return user Mr. Taxact 2012 return user and Mrs. Taxact 2012 return user Auburn can split the family contribution limit ($6,450) equally or they can agree on a different division. Taxact 2012 return user If they split it equally, Mr. Taxact 2012 return user Auburn can contribute $4,225 to an HSA (one-half the maximum contribution for family coverage ($3,225) + $1,000 additional contribution) and Mrs. Taxact 2012 return user Auburn can contribute $3,225 to an HSA. Taxact 2012 return user Employer contributions. Taxact 2012 return user   You must reduce the amount you, or any other person, can contribute to your HSA by the amount of any contributions made by your employer that are excludable from your income. Taxact 2012 return user This includes amounts contributed to your account by your employer through a cafeteria plan. Taxact 2012 return user Enrolled in Medicare. Taxact 2012 return user   Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. Taxact 2012 return user Example. Taxact 2012 return user You turned age 65 in July 2013 and enrolled in Medicare. Taxact 2012 return user You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Taxact 2012 return user Your contribution limit is $2,125 ($4,250 × 6 ÷ 12). Taxact 2012 return user Qualified HSA funding distribution. Taxact 2012 return user   A qualified HSA funding distribution may be made from your traditional IRA or Roth IRA to your HSA. Taxact 2012 return user This distribution cannot be made from an ongoing SEP IRA or SIMPLE IRA. Taxact 2012 return user For this purpose, a SEP IRA or SIMPLE IRA is ongoing if an employer contribution is made for the plan year ending with or within your tax year in which the distribution would be made. Taxact 2012 return user   The maximum qualified HSA funding distribution depends on the HDHP coverage (self-only or family) you have on the first day of the month in which the contribution is made and your age as of the end of the tax year. Taxact 2012 return user The distribution must be made directly by the trustee of the IRA to the trustee of the HSA. Taxact 2012 return user The distribution is not included in your income, is not deductible, and reduces the amount that can be contributed to your HSA. Taxact 2012 return user The qualified HSA funding distribution is shown on Form 8889 for the year in which the distribution is made. Taxact 2012 return user   You can make only one qualified HSA funding distribution during your lifetime. Taxact 2012 return user However, if you make a distribution during a month when you have self-only HDHP coverage, you can make another qualified HSA funding distribution in a later month in that tax year if you change to family HDHP coverage. Taxact 2012 return user The total qualified HSA funding distribution cannot be more than the contribution limit for family HDHP coverage plus any additional contribution to which you are entitled. Taxact 2012 return user Example. Taxact 2012 return user In 2013, you are an eligible individual, age 57, with self-only HDHP coverage. Taxact 2012 return user You can make a qualified HSA funding distribution of $4,250 ($3,250 plus $1,000 additional contribution). Taxact 2012 return user Funding distribution – testing period. Taxact 2012 return user   You must remain an eligible individual during the testing period. Taxact 2012 return user For a qualified HSA funding distribution, the testing period begins with the month in which the qualified HSA funding distribution is contributed and ends on the last day of the 12th month following that month. Taxact 2012 return user For example, if a qualified HSA funding distribution is contributed to your HSA on August 10, 2013, your testing period begins in August 2013, and ends on August 31, 2014. Taxact 2012 return user   If you fail to remain an eligible individual during the testing period, other than because of death or becoming disabled, you will have to include in income the qualified HSA funding distribution. Taxact 2012 return user You include this amount in income in the year in which you fail to be an eligible individual. Taxact 2012 return user This amount is also subject to a 10% additional tax. Taxact 2012 return user The income and the additional tax are shown on Form 8889, Part III. Taxact 2012 return user   Each qualified HSA funding distribution allowed has its own testing period. Taxact 2012 return user For example, you are an eligible individual, age 45, with self-only HDHP coverage. Taxact 2012 return user On June 18, 2013, you make a qualified HSA funding distribution of $3,250. Taxact 2012 return user On July 27, 2013, you enroll in family HDHP coverage and on August 17, 2013, you make a qualified HSA funding distribution of $3,200. Taxact 2012 return user Your testing period for the first distribution begins in June 2013 and ends on June 30, 2014. Taxact 2012 return user Your testing period for the second distribution begins in August 2013 and ends on August 31, 2014. Taxact 2012 return user   The testing period rule that applies under the last-month rule (discussed earlier) does not apply to amounts contributed to an HSA through a qualified HSA funding distribution. Taxact 2012 return user If you remain an eligible individual during the entire funding distribution testing period, then no amount of that distribution is included in income and will not be subject to the additional tax for failing to meet the last-month rule testing period. Taxact 2012 return user Rollovers A rollover contribution is not included in your income, is not deductible, and does not reduce your contribution limit. Taxact 2012 return user Archer MSAs and other HSAs. Taxact 2012 return user   You can roll over amounts from Archer MSAs and other HSAs into an HSA. Taxact 2012 return user You do not have to be an eligible individual to make a rollover contribution from your existing HSA to a new HSA. Taxact 2012 return user Rollover contributions do not need to be in cash. Taxact 2012 return user Rollovers are not subject to the annual contribution limits. Taxact 2012 return user   You must roll over the amount within 60 days after the date of receipt. Taxact 2012 return user You can make only one rollover contribution to an HSA during a 1-year period. Taxact 2012 return user Note. Taxact 2012 return user If you instruct the trustee of your HSA to transfer funds directly to the trustee of another of your HSAs, the transfer is not considered a rollover. Taxact 2012 return user There is no limit on the number of these transfers. Taxact 2012 return user Do not include the amount transferred in income, deduct it as a contribution, or include it as a distribution on Form 8889. Taxact 2012 return user When To Contribute You can make contributions to your HSA for 2013 until April 15, 2014. Taxact 2012 return user If you fail to be an eligible individual during 2013, you can still make contributions, up until April 15, 2014, for the months you were an eligible individual. Taxact 2012 return user Your employer can make contributions to your HSA between January 1, 2014, and April 15, 2014, that are allocated to 2013. Taxact 2012 return user Your employer must notify you and the trustee of your HSA that the contribution is for 2013. Taxact 2012 return user The contribution will be reported on your 2014 Form W-2. Taxact 2012 return user Reporting Contributions on Your Return Contributions made by your employer are not included in your income. Taxact 2012 return user Contributions to an employee's account by an employer using the amount of an employee's salary reduction through a cafeteria plan are treated as employer contributions. Taxact 2012 return user Generally, you can claim contributions you made and contributions made by any other person, other than your employer, on your behalf, as an adjustment to income. Taxact 2012 return user Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Taxact 2012 return user The contributions are treated as a distribution of money and are not included in the partner's gross income. Taxact 2012 return user Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are deductible by the partnership and includible in the partner's gross income. Taxact 2012 return user In both situations, the partner can deduct the contribution made to the partner's HSA. Taxact 2012 return user Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are deductible by the S corporation and includible in the shareholder-employee's gross income. Taxact 2012 return user The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Taxact 2012 return user Form 8889. Taxact 2012 return user   Report all contributions to your HSA on Form 8889 and file it with your Form 1040 or Form 1040NR. Taxact 2012 return user You should include all contributions made for 2013, including those made by April 15, 2014, that are designated for 2013. Taxact 2012 return user Contributions made by your employer and qualified HSA funding distributions are also shown on the form. Taxact 2012 return user   You should receive Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, from the trustee showing the amount contributed to your HSA during the year. Taxact 2012 return user Your employer's contributions also will be shown in box 12 of Form W-2, Wage and Tax Statement, with code W. Taxact 2012 return user Follow the instructions for Form 8889. Taxact 2012 return user Report your HSA deduction on Form 1040 or Form 1040NR. Taxact 2012 return user Excess contributions. Taxact 2012 return user   You will have excess contributions if the contributions to your HSA for the year are greater than the limits discussed earlier. Taxact 2012 return user Excess contributions are not deductible. Taxact 2012 return user Excess contributions made by your employer are included in your gross income. Taxact 2012 return user If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. Taxact 2012 return user   Generally, you must pay a 6% excise tax on excess contributions. Taxact 2012 return user See Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Taxact 2012 return user The excise tax applies to each tax year the excess contribution remains in the account. Taxact 2012 return user   You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions. Taxact 2012 return user You withdraw the excess contributions by the due date, including extensions, of your tax return for the year the contributions were made. Taxact 2012 return user You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. Taxact 2012 return user If you fail to remain an eligible individual during any of the testing periods, discussed earlier, the amount you have to include in income is not an excess contribution. Taxact 2012 return user If you withdraw any of those amounts, the amount is treated the same as any other distribution from an HSA, discussed later. Taxact 2012 return user Deducting an excess contribution in a later year. Taxact 2012 return user   You may be able to deduct excess contributions for previous years that are still in your HSA. Taxact 2012 return user The excess contribution you can deduct for the current year is the lesser of the following two amounts. Taxact 2012 return user Your maximum HSA contribution limit for the year minus any amounts contributed to your HSA for the year. Taxact 2012 return user The total excess contributions in your HSA at the beginning of the year. Taxact 2012 return user   Amounts contributed for the year include contributions by you, your employer, and any other person. Taxact 2012 return user They also include any qualified HSA funding distribution made to your HSA. Taxact 2012 return user Any excess contribution remaining at the end of a tax year is subject to the excise tax. Taxact 2012 return user See Form 5329. Taxact 2012 return user Distributions From an HSA You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. Taxact 2012 return user When you pay medical expenses during the year that are not reimbursed by your HDHP, you can ask the trustee of your HSA to send you a distribution from your HSA. Taxact 2012 return user You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. Taxact 2012 return user If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. Taxact 2012 return user You do not have to make distributions from your HSA each year. Taxact 2012 return user If you are no longer an eligible individual, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Taxact 2012 return user Generally, a distribution is money you get from your health savings account. Taxact 2012 return user Your total distributions include amounts paid with a debit card that restricts payments to health care and amounts withdrawn from the HSA by other individuals that you have designated. Taxact 2012 return user The trustee will report any distribution to you and the IRS on Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Taxact 2012 return user Qualified medical expenses. Taxact 2012 return user   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Taxact 2012 return user These are explained in Publication 502, Medical and Dental Expenses. Taxact 2012 return user   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for HSA purposes. Taxact 2012 return user A medicine or drug will be a qualified medical expense for HSA purposes only if the medicine or drug: Requires a prescription, Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it, or Is insulin. Taxact 2012 return user   For HSA purposes, expenses incurred before you establish your HSA are not qualified medical expenses. Taxact 2012 return user State law determines when an HSA is established. Taxact 2012 return user An HSA that is funded by amounts rolled over from an Archer MSA or another HSA is established on the date the prior account was established. Taxact 2012 return user   If, under the last-month rule, you are considered to be an eligible individual for the entire year for determining the contribution amount, only those expenses incurred after you actually establish your HSA are qualified medical expenses. Taxact 2012 return user   Qualified medical expenses are those incurred by the following persons. Taxact 2012 return user You and your spouse. Taxact 2012 return user All dependents you claim on your tax return. Taxact 2012 return user Any person you could have claimed as a dependent on your return except that: The person filed a joint return, The person had gross income of $3,900 or more, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Taxact 2012 return user    For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child's exemption. Taxact 2012 return user You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your HSA. Taxact 2012 return user Insurance premiums. Taxact 2012 return user   You cannot treat insurance premiums as qualified medical expenses unless the premiums are for: Long-term care insurance. Taxact 2012 return user Health care continuation coverage (such as coverage under COBRA). Taxact 2012 return user Health care coverage while receiving unemployment compensation under federal or state law. Taxact 2012 return user Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap). Taxact 2012 return user   The premiums for long-term care insurance (item (1)) that you can treat as qualified medical expenses are subject to limits based on age and are adjusted annually. Taxact 2012 return user See Limit on long-term care premiums you can deduct in the instructions for Schedule A (Form 1040). Taxact 2012 return user   Items (2) and (3) can be for your spouse or a dependent meeting the requirement for that type of coverage. Taxact 2012 return user For item (4), if you, the account beneficiary, are not 65 or older, Medicare premiums for coverage of your spouse or a dependent (who is 65 or older) generally are not qualified medical expenses. Taxact 2012 return user Health coverage tax credit. Taxact 2012 return user   You cannot claim this credit for premiums that you pay with a tax-free distribution from your HSA. Taxact 2012 return user See Publication 502 for more information on this credit. Taxact 2012 return user Deemed distributions from HSAs. Taxact 2012 return user   The following situations result in deemed taxable distributions from your HSA. Taxact 2012 return user You engaged in any transaction prohibited by section 4975 with respect to any of your HSAs, at any time in 2013. Taxact 2012 return user Your account ceases to be an HSA as of January 1, 2013, and you must include the fair market value of all assets in the account as of January 1, 2013, on Form 8889. Taxact 2012 return user You used any portion of any of your HSAs as security for a loan at any time in 2013. Taxact 2012 return user You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Taxact 2012 return user   Examples of prohibited transactions include the direct or indirect: Sale, exchange, or leasing of property between you and the HSA, Lending of money between you and the HSA, Furnishing goods, services, or facilities between you and the HSA, and Transfer to or use by you, or for your benefit, of any assets of the HSA. Taxact 2012 return user   Any deemed distribution will not be treated as used to pay qualified medical expenses. Taxact 2012 return user These distributions are included in your income and are subject to the additional 20% tax, discussed later. Taxact 2012 return user Recordkeeping. Taxact 2012 return user You must keep records sufficient to show that: The distributions were exclusively to pay or reimburse qualified medical expenses, The qualified medical expenses had not been previously paid or reimbursed from another source, and The medical expenses had not been taken as an itemized deduction in any year. Taxact 2012 return user Do not send these records with your tax return. Taxact 2012 return user Keep them with your tax records. Taxact 2012 return user Reporting Distributions on Your Return How you report your distributions depends on whether or not you use the distribution for qualified medical expenses (defined earlier). Taxact 2012 return user If you use a distribution from your HSA for qualified medical expenses, you do not pay tax on the distribution but you have to report the distribution on Form 8889. Taxact 2012 return user However, the distribution of an excess contribution taken out after the due date, including extensions, of your return is subject to tax even if used for qualified medical expenses. Taxact 2012 return user Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Taxact 2012 return user If you do not use a distribution from your HSA for qualified medical expenses, you must pay tax on the distribution. Taxact 2012 return user Report the amount on Form 8889 and file it with your Form 1040 or Form 1040NR. Taxact 2012 return user You may have to pay an additional 20% tax on your taxable distribution. Taxact 2012 return user HSA administration and maintenance fees withdrawn by the trustee are not reported as distributions from the HSA. Taxact 2012 return user Additional tax. Taxact 2012 return user   There is an additional 20% tax on the part of your distributions not used for qualified medical expenses. Taxact 2012 return user Figure the tax on Form 8889 and file it with your Form 1040 or Form 1040NR. Taxact 2012 return user Exceptions. Taxact 2012 return user   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Taxact 2012 return user Balance in an HSA An HSA is generally exempt from tax. Taxact 2012 return user You are permitted to take a distribution from your HSA at any time; however, only those amounts used exclusively to pay for qualified medical expenses are tax free. Taxact 2012 return user Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Taxact 2012 return user Earnings on amounts in an HSA are not included in your income while held in the HSA. Taxact 2012 return user Death of HSA Holder You should choose a beneficiary when you set up your HSA. Taxact 2012 return user What happens to that HSA when you die depends on whom you designate as the beneficiary. Taxact 2012 return user Spouse is the designated beneficiary. Taxact 2012 return user   If your spouse is the designated beneficiary of your HSA, it will be treated as your spouse's HSA after your death. Taxact 2012 return user Spouse is not the designated beneficiary. Taxact 2012 return user   If your spouse is not the designated beneficiary of your HSA: The account stops being an HSA, and The fair market value of the HSA becomes taxable to the beneficiary in the year in which you die. Taxact 2012 return user If your estate is the beneficiary, the value is included on your final income tax return. Taxact 2012 return user The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death. Taxact 2012 return user Filing Form 8889 You must file Form 8889 with your Form 1040 or Form 1040NR if you (or your spouse, if married filing a joint return) had any activity in your HSA during the year. Taxact 2012 return user You must file the form even if only your employer or your spouse's employer made contributions to the HSA. Taxact 2012 return user If, during the tax year, you are the beneficiary of two or more HSAs or you are a beneficiary of an HSA and you have your own HSA, you must complete a separate Form 8889 for each HSA. Taxact 2012 return user Enter “statement” at the top of each Form 8889 and complete the form as instructed. Taxact 2012 return user Next, complete a controlling Form 8889 combining the amounts shown on each of the statement Forms 8889. Taxact 2012 return user Attach the statements to your tax return after the controlling Form 8889. Taxact 2012 return user Employer Participation This section contains the rules that employers must follow if they decide to make HSAs available to their employees. Taxact 2012 return user Unlike the previous discussions, “you” refers to the employer and not to the employee. Taxact 2012 return user Health plan. Taxact 2012 return user   If you want your employees to be able to have an HSA, they must have an HDHP. Taxact 2012 return user You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Taxact 2012 return user Contributions. Taxact 2012 return user   You can make contributions to your employees' HSAs. Taxact 2012 return user You deduct the contributions on your business income tax return for the year in which you make the contributions. Taxact 2012 return user If the contribution is allocated to the prior year, you still deduct it in the year in which you made the contribution. Taxact 2012 return user   For more information on employer contributions, see Notice 2008-59, 2008-29 I. Taxact 2012 return user R. Taxact 2012 return user B. Taxact 2012 return user 123, questions 23 through 27, available at www. Taxact 2012 return user irs. Taxact 2012 return user gov/irb/2008-29_IRB/ar11. Taxact 2012 return user html. Taxact 2012 return user Comparable contributions. Taxact 2012 return user   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' HSAs. Taxact 2012 return user Your contributions are comparable if they are either: The same amount, or The same percentage of the annual deductible limit under the HDHP covering the employees. Taxact 2012 return user The comparability rules do not apply to contributions made through a cafeteria plan. Taxact 2012 return user Comparable participating employees. Taxact 2012 return user   Comparable participating employees: Are covered by your HDHP and are eligible to establish an HSA, Have the same category of coverage (either self-only or family coverage), and Have the same category of employment (part-time, full-time, or former employees). Taxact 2012 return user   To meet the comparability requirements for eligible employees who have not established an HSA by December 31 or have not notified you that they have an HSA, you must meet a notice requirement and a contribution requirement. Taxact 2012 return user   You will meet the notice requirement if by January 15 of the following calendar year you provide a written notice to all such employees. Taxact 2012 return user The notice must state that each eligible employee who, by the last day of February, establishes an HSA and notifies you that they have established an HSA will receive a comparable contribution to the HSA for the prior year. Taxact 2012 return user For a sample of the notice, see Regulation 54. Taxact 2012 return user 4980G-4 A-14(c). Taxact 2012 return user You will meet the contribution requirement for these employees if by April 15, 2014, you contribute comparable amounts plus reasonable interest to the employee's HSA for the prior year. Taxact 2012 return user Note. Taxact 2012 return user For purposes of making contributions to HSAs of non-highly compensated employees, highly compensated employees shall not be treated as comparable participating employees. Taxact 2012 return user Excise tax. Taxact 2012 return user   If you made contributions to your employees' HSAs that were not comparable, you must pay an excise tax of 35% of the amount you contributed. Taxact 2012 return user Employment taxes. Taxact 2012 return user   Amounts you contribute to your employees' HSAs are generally not subject to employment taxes. Taxact 2012 return user You must report the contributions in box 12 of the Form W-2 you file for each employee. Taxact 2012 return user This includes the amounts the employee elected to contribute through a cafeteria plan. Taxact 2012 return user Enter code “W” in box 12. Taxact 2012 return user Medical Savings Accounts (MSAs) Archer MSAs were created to help self-employed individuals and employees of certain small employers meet the medical care costs of the account holder, the account holder's spouse, or the account holder's dependent(s). Taxact 2012 return user After December 31, 2007, you cannot be treated as an eligible individual for Archer MSA purposes unless: You were an active participant for any tax year ending before January 1, 2008, or You became an active participant for a tax year ending after December 31, 2007, by reason of coverage under a high deductible health plan (HDHP) of an Archer MSA participating employer. Taxact 2012 return user 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 eligible for Medicare. Taxact 2012 return user Archer MSAs An Archer MSA is a tax-exempt trust or custodial account that you set up with a U. Taxact 2012 return user S. Taxact 2012 return user financial institution (such as a bank or an insurance company) in which you can save money exclusively for future medical expenses. Taxact 2012 return user What are the benefits of an Archer MSA?   You may enjoy several benefits from having an Archer MSA. Taxact 2012 return user You can claim a tax deduction for contributions you make even if you do not itemize your deductions on Form 1040 or Form 1040NR. Taxact 2012 return user The interest or other earnings on the assets in your Archer MSA are tax free. Taxact 2012 return user Distributions may be tax free if you pay qualified medical expenses. Taxact 2012 return user See Qualified medical expenses , later. Taxact 2012 return user The contributions remain in your Archer MSA from year to year until you use them. Taxact 2012 return user An Archer MSA is “portable” so it stays with you if you change employers or leave the work force. Taxact 2012 return user Qualifying for an Archer MSA To qualify for an Archer MSA, you must be either of the following. Taxact 2012 return user An employee (or the spouse of an employee) of a small employer (defined later) that maintains a self-only or family HDHP for you (or your spouse). Taxact 2012 return user A self-employed person (or the spouse of a self-employed person) who maintains a self-only or family HDHP. Taxact 2012 return user You can have no other health or Medicare coverage except what is permitted under Other health coverage , later. Taxact 2012 return user You must be an eligible individual on the first day of a given month to get an Archer MSA deduction for that month. Taxact 2012 return user If another taxpayer is entitled to claim an exemption for you, you cannot claim a deduction for an Archer MSA contribution. Taxact 2012 return user This is true even if the other person does not actually claim your exemption. Taxact 2012 return user Small employer. Taxact 2012 return user   A small employer is generally an employer who had an average of 50 or fewer employees during either of the last 2 calendar years. Taxact 2012 return user The definition of small employer is modified for new employers and growing employers. Taxact 2012 return user Growing employer. Taxact 2012 return user   A small employer may begin HDHPs and Archer MSAs for his or her employees and then grow beyond 50 employees. Taxact 2012 return user The employer will continue to meet the requirement for small employers if he or she: Had 50 or fewer employees when the Archer MSAs began, Made a contribution that was excludable or deductible as an Archer MSA for the last year he or she had 50 or fewer employees, and Had an average of 200 or fewer employees each year after 1996. Taxact 2012 return user Changing employers. Taxact 2012 return user   If you change employers, your Archer MSA moves with you. Taxact 2012 return user However, you may not make additional contributions unless you are otherwise eligible. Taxact 2012 return user High deductible health plan (HDHP). Taxact 2012 return user   To be eligible for an Archer MSA, you must be covered under an HDHP. Taxact 2012 return user An HDHP has: A higher annual deductible than typical health plans, and A maximum limit on the annual out-of-pocket medical expenses that you must pay for covered expenses. Taxact 2012 return user Limits. Taxact 2012 return user   The following table shows the limits for annual deductibles and the maximum out-of-pocket expenses for HDHPs for 2013. Taxact 2012 return user   Self-only coverage Family coverage Minimum annual deductible $2,150 $4,300 Maximum annual deductible $3,200 $6,450 Maximum annual out-of-pocket expenses $4,300 $7,850 Family plans that do not meet the high deductible rules. Taxact 2012 return user   There are some family plans that have deductibles for both the family as a whole and for individual family members. Taxact 2012 return user Under these plans, if you meet the individual deductible for one family member, you do not have to meet the higher annual deductible amount for the family. Taxact 2012 return user If either the deductible for the family as a whole or the deductible for an individual family member is less than the minimum annual deductible for family coverage, the plan does not qualify as an HDHP. Taxact 2012 return user Example. Taxact 2012 return user You have family health insurance coverage in 2013. Taxact 2012 return user The annual deductible for the family plan is $5,500. Taxact 2012 return user This plan also has an individual deductible of $2,000 for each family member. Taxact 2012 return user The plan does not qualify as an HDHP because the deductible for an individual family member is less than the minimum annual deductible ($4,300) for family coverage. Taxact 2012 return user Other health coverage. Taxact 2012 return user   You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. Taxact 2012 return user However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan. Taxact 2012 return user However, you can have additional insurance that provides benefits only for the following items. Taxact 2012 return user Liabilities incurred under workers' compensation laws, torts, or ownership or use of property. Taxact 2012 return user A specific disease or illness. Taxact 2012 return user A fixed amount per day (or other period) of hospitalization. Taxact 2012 return user You can also have coverage (whether provided through insurance or otherwise) for the following items. Taxact 2012 return user Accidents. Taxact 2012 return user Disability. Taxact 2012 return user Dental care. Taxact 2012 return user Vision care. Taxact 2012 return user Long-term care. Taxact 2012 return user Contributions to an MSA Contributions to an Archer MSA must be made in cash. Taxact 2012 return user You cannot contribute stock or other property to an Archer MSA. Taxact 2012 return user Who can contribute to my Archer MSA?   If you are an employee, your employer may make contributions to your Archer MSA. Taxact 2012 return user (You do not pay tax on these contributions. Taxact 2012 return user ) If your employer does not make contributions to your Archer MSA, or you are self-employed, you can make your own contributions to your Archer MSA. Taxact 2012 return user Both you and your employer cannot make contributions to your Archer MSA in the same year. Taxact 2012 return user You do not have to make contributions to your Archer MSA every year. Taxact 2012 return user    If your spouse is covered by your HDHP and an excludable amount is contributed by your spouse's employer to an Archer MSA belonging to your spouse, you cannot make contributions to your own Archer MSA that year. Taxact 2012 return user Limits There are two limits on the amount you or your employer can contribute to your Archer MSA: The annual deductible limit. Taxact 2012 return user An income limit. Taxact 2012 return user Annual deductible limit. Taxact 2012 return user   You (or your employer) can contribute up to 75% of the annual deductible of your HDHP (65% if you have a self-only plan) to your Archer MSA. Taxact 2012 return user You must have the HDHP all year to contribute the full amount. Taxact 2012 return user If you do not qualify to contribute the full amount for the year, determine your annual deductible limit by using the worksheet in the Instructions for Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Taxact 2012 return user Example 1. Taxact 2012 return user You have an HDHP for your family all year in 2013. Taxact 2012 return user The annual deductible is $5,000. Taxact 2012 return user You can contribute up to $3,750 ($5,000 × 75%) to your Archer MSA for the year. Taxact 2012 return user Example 2. Taxact 2012 return user You have an HDHP for your family for the entire months of July through December 2013 (6 months). Taxact 2012 return user The annual deductible is $5,000. Taxact 2012 return user You can contribute up to $1,875 ($5,000 × 75% ÷ 12 × 6) to your Archer MSA for the year. Taxact 2012 return user If you and your spouse each have a family plan, you are treated as having family coverage with the lower annual deductible of the two health plans. Taxact 2012 return user The contribution limit is split equally between you unless you agree on a different division. Taxact 2012 return user Income limit. Taxact 2012 return user   You cannot contribute more than you earned for the year from the employer through whom you have your HDHP. Taxact 2012 return user   If you are self-employed, you cannot contribute more than your net self-employment income. Taxact 2012 return user This is your income from self-employment minus expenses (including the deductible part of self-employment tax). Taxact 2012 return user Example 1. Taxact 2012 return user Noah Paul earned $25,000 from ABC Company in 2013. Taxact 2012 return user Through ABC, he had an HDHP for his family for the entire year. Taxact 2012 return user The annual deductible was $5,000. Taxact 2012 return user He can contribute up to $3,750 to his Archer MSA (75% × $5,000). Taxact 2012 return user He can contribute the full amount because he earned more than $3,750 at ABC. Taxact 2012 return user Example 2. Taxact 2012 return user Westley Lawrence is self-employed. Taxact 2012 return user He had an HDHP for his family for the entire year in 2013. Taxact 2012 return user The annual deductible was $5,000. Taxact 2012 return user Based on the annual deductible, the maximum contribution to his Archer MSA would have been $3,750 (75% × $5,000). Taxact 2012 return user However, after deducting his business expenses, Joe's net self-employment income is $2,500 for the year. Taxact 2012 return user Therefore, he is limited to a contribution of $2,500. Taxact 2012 return user Individuals enrolled in Medicare. Taxact 2012 return user   Beginning with the first month you are enrolled in Medicare, you cannot contribute to an Archer MSA. Taxact 2012 return user However, you may be eligible for a Medicare Advantage MSA, discussed later. Taxact 2012 return user When To Contribute You can make contributions to your Archer MSA for 2013 until April 15, 2014. Taxact 2012 return user Reporting Contributions on Your Return Report all contributions to your Archer MSA on Form 8853 and file it with your Form 1040 or Form 1040NR. Taxact 2012 return user You should include all contributions you, or your employer, made for 2013, including those made by April 15, 2014, that are designated for 2013. Taxact 2012 return user You should receive Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information, from the trustee showing the amount you (or your employer) contributed during the year. Taxact 2012 return user Your employer's contributions should be shown in box 12 of Form W-2, Wage and Tax Statement, with code R. Taxact 2012 return user Follow the instructions for Form 8853 and complete the worksheet in the instructions. Taxact 2012 return user Report your Archer MSA deduction on Form 1040 or Form 1040NR. Taxact 2012 return user Excess contributions. Taxact 2012 return user   You will have excess contributions if the contributions to your Archer MSA for the year are greater than the limits discussed earlier. Taxact 2012 return user Excess contributions are not deductible. Taxact 2012 return user Excess contributions made by your employer are included in your gross income. Taxact 2012 return user If the excess contribution is not included in box 1 of Form W-2, you must report the excess as “Other income” on your tax return. Taxact 2012 return user   Generally, you must pay a 6% excise tax on excess contributions. Taxact 2012 return user See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to figure the excise tax. Taxact 2012 return user The excise tax applies to each tax year the excess contribution remains in the account. Taxact 2012 return user   You may withdraw some or all of the excess contributions and not pay the excise tax on the amount withdrawn if you meet the following conditions. Taxact 2012 return user You withdraw the excess contributions by the due date, including extensions, of your tax return. Taxact 2012 return user You withdraw any income earned on the withdrawn contributions and include the earnings in “Other income” on your tax return for the year you withdraw the contributions and earnings. Taxact 2012 return user Deducting an excess contribution in a later year. Taxact 2012 return user   You may be able to deduct excess contributions for previous years that are still in your Archer MSA. Taxact 2012 return user The excess contribution you can deduct in the current year is the lesser of the following two amounts. Taxact 2012 return user Your maximum Archer MSA contribution limit for the year minus any amounts contributed to your Archer MSA for the year. Taxact 2012 return user The total excess contributions in your Archer MSA at the beginning of the year. Taxact 2012 return user   Any excess contributions remaining at the end of a tax year are subject to the excise tax. Taxact 2012 return user See Form 5329. Taxact 2012 return user Distributions From an MSA You will generally pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible for the plan. Taxact 2012 return user When you pay medical expenses during the year that are not reimbursed by your HDHP, you can ask the trustee of your Archer MSA to send you a distribution from your Archer MSA. Taxact 2012 return user You can receive tax-free distributions from your Archer MSA to pay for qualified medical expenses (discussed later). Taxact 2012 return user If you receive distributions for other reasons, the amount will be subject to income tax and may be subject to an additional 20% tax as well. Taxact 2012 return user You do not have to make withdrawals from your Archer MSA each year. Taxact 2012 return user If you no longer qualify to make contributions, you can still receive tax-free distributions to pay or reimburse your qualified medical expenses. Taxact 2012 return user A distribution is money you get from your Archer MSA. Taxact 2012 return user The trustee will report any distribution to you and the IRS on Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA. Taxact 2012 return user Qualified medical expenses. Taxact 2012 return user   Qualified medical expenses are those expenses that would generally qualify for the medical and dental expenses deduction. Taxact 2012 return user These are explained in Publication 502. Taxact 2012 return user   Also, non-prescription medicines (other than insulin) are not considered qualified medical expenses for MSA purposes. Taxact 2012 return user A medicine or drug will be a qualified medical expense for MSA purposes only if the medicine or drug: Requires a prescription, Is available without a prescription (an over-the-counter medicine or drug) and you get a prescription for it, or Is insulin. Taxact 2012 return user   Qualified medical expenses are those incurred by the following persons. Taxact 2012 return user You and your spouse. Taxact 2012 return user All dependents you claim on your tax return. Taxact 2012 return user Any person you could have claimed as a dependent on your return except that: The person filed a joint return, The person had gross income of $3,900 or more, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Taxact 2012 return user    For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child's exemption. Taxact 2012 return user    You cannot deduct qualified medical expenses as an itemized deduction on Schedule A (Form 1040) that are equal to the tax-free distribution from your Archer MSA. Taxact 2012 return user Special rules for insurance premiums. Taxact 2012 return user   Generally, you cannot treat insurance premiums as qualified medical expenses for Archer MSAs. Taxact 2012 return user You can, however, treat premiums for long-term care coverage, health care coverage while you receive unemployment benefits, or health care continuation coverage required under any federal law as qualified medical expenses for Archer MSAs. Taxact 2012 return user Health coverage tax credit. Taxact 2012 return user   You cannot claim this credit for premiums that you pay with a tax-free distribution from your Archer MSA. Taxact 2012 return user See Publication 502 for information on this credit. Taxact 2012 return user Deemed distributions from Archer MSAs. Taxact 2012 return user   The following situations result in deemed taxable distributions from your Archer MSA. Taxact 2012 return user You engaged in any transaction prohibited by section 4975 with respect to any of your Archer MSAs at any time in 2013. Taxact 2012 return user Your account ceases to be an Archer MSA as of January 1, 2013, and you must include the fair market value of all assets in the account as of January 1, 2013, on Form 8853. Taxact 2012 return user You used any portion of any of your Archer MSAs as security for a loan at any time in 2013. Taxact 2012 return user You must include the fair market value of the assets used as security for the loan as income on Form 1040 or Form 1040NR. Taxact 2012 return user   Examples of prohibited transactions include the direct or indirect: Sale, exchange, or leasing of property between you and the Archer MSA, Lending of money between you and the Archer MSA, Furnishing goods, services, or facilities between you and the Archer MSA, and Transfer to or use by you, or for your benefit, of any assets of the Archer MSA. Taxact 2012 return user   Any deemed distribution will not be treated as used to pay qualified medical expenses. Taxact 2012 return user These distributions are included in your income and are subject to the additional 20% tax, discussed later. Taxact 2012 return user Recordkeeping. Taxact 2012 return user You must keep records sufficient to show that: The distributions were exclusively to pay or reimburse qualified medical expenses, The qualified medical expenses had not been previously paid or reimbursed from another source, and The medical expenses had not been taken as an itemized deduction in any year. Taxact 2012 return user Do not send these records with your tax return. Taxact 2012 return user Keep them with your tax records. Taxact 2012 return user Reporting Distributions on Your Return How you report your distributions depends on whether or not you use the distribution for qualified medical expenses (defined earlier). Taxact 2012 return user If you use a distribution from your Archer MSA for qualified medical expenses, you do not pay tax on the distribution but you have to report the distribution on Form 8853. Taxact 2012 return user Follow the instructions for the form and file it with your Form 1040 or Form 1040NR. Taxact 2012 return user If you do not use a distribution from your Archer MSA for qualified medical expenses, you must pay tax on the distribution. Taxact 2012 return user Report the amount on Form 8853 and file it with your Form 1040 or Form 1040NR. Taxact 2012 return user You may have to pay an additional 20% tax, discussed later, on your taxable distribution. Taxact 2012 return user If an amount (other than a rollover) is contributed to your Archer MSA this year (by you or your employer), you also must report and pay tax on a distribution you receive from your Archer MSA this year that is used to pay medical expenses of someone who is not covered by an HDHP, or is also covered by another health plan that is not an HDHP, at the time the expenses are incurred. Taxact 2012 return user Rollovers. Taxact 2012 return user   Generally, any distribution from an Archer MSA that you roll over into another Archer MSA or an HSA is not taxable if you complete the rollover within 60 days. Taxact 2012 return user An Archer MSA and an HSA can only receive one rollover contribution during a 1-year period. Taxact 2012 return user See the Form 8853 instructions for more information. Taxact 2012 return user Additional tax. Taxact 2012 return user   There is a 20% additional tax on the part of your distributions not used for qualified medical expenses. Taxact 2012 return user Figure the tax on Form 8853 and file it with your Form 1040 or Form 1040NR. Taxact 2012 return user Report the additional tax in the total on Form 1040 or Form 1040NR. Taxact 2012 return user Exceptions. Taxact 2012 return user   There is no additional tax on distributions made after the date you are disabled, reach age 65, or die. Taxact 2012 return user Balance in an Archer MSA An Archer MSA is generally exempt from tax. Taxact 2012 return user You are permitted to take a distribution from your Archer MSA at any time; however, only those amounts used exclusively to pay for qualified medical expenses are tax free. Taxact 2012 return user Amounts that remain at the end of the year are generally carried over to the next year (see Excess contributions , earlier). Taxact 2012 return user Earnings on amounts in an Archer MSA are not included in your income while held in the Archer MSA. Taxact 2012 return user Death of the Archer MSA Holder You should choose a beneficiary when you set up your Archer MSA. Taxact 2012 return user What happens to that Archer MSA when you die depends on whom you designate as the beneficiary. Taxact 2012 return user Spouse is the designated beneficiary. Taxact 2012 return user   If your spouse is the designated beneficiary of your Archer MSA, it will be treated as your spouse's Archer MSA after your death. Taxact 2012 return user Spouse is not the designated beneficiary. Taxact 2012 return user   If your spouse is not the designated beneficiary of your Archer MSA: The account stops being an Archer MSA, and The fair market value of the Archer MSA becomes taxable to the beneficiary in the year in which you die. Taxact 2012 return user   If your estate is the beneficiary, the fair market value of the Archer MSA will be included on your final income tax return. Taxact 2012 return user The amount taxable to a beneficiary other than the estate is reduced by any qualified medical expenses for the decedent that are paid by the beneficiary within 1 year after the date of death. Taxact 2012 return user Filing Form 8853 You must file Form 8853 with your Form 1040 or Form 1040NR if you (or your spouse, if married filing a joint return) had any activity in your Archer MSA during the year. Taxact 2012 return user You must file the form even if only your employer or your spouse's employer made contributions to the Archer MSA. Taxact 2012 return user If, during the tax year, you are the beneficiary of two or more Archer MSAs or you are a beneficiary of an Archer MSA and you have your own Archer MSA, you must complete a separate Form 8853 for each MSA. Taxact 2012 return user Enter “statement” at the top of each Form 8853 and complete the form as instructed. Taxact 2012 return user Next, complete a controlling Form 8853 combining the amounts shown on each of the statement Forms 8853. Taxact 2012 return user Attach the statements to your tax return after the controlling Form 8853. Taxact 2012 return user Employer Participation This section contains the rules that employers must follow if they decide to make Archer MSAs available to their employees. Taxact 2012 return user Unlike the previous discussions, “you” refers to the employer and not to the employee. Taxact 2012 return user Health plan. Taxact 2012 return user   If you want your employees to be able to have an Archer MSA, you must make an HDHP available to them. Taxact 2012 return user You can provide no additional coverage other than those exceptions listed previously under Other health coverage . Taxact 2012 return user Contributions. Taxact 2012 return user   You can make contributions to your employees' Archer MSAs. Taxact 2012 return user You deduct the contributions on the “Employee benefit programs” line of your business income tax return for the year in which you make the contributions. Taxact 2012 return user If you are filing Form 1040, Schedule C, this is Part II, line 14. Taxact 2012 return user Comparable contributions. Taxact 2012 return user   If you decide to make contributions, you must make comparable contributions to all comparable participating employees' Archer MSAs. Taxact 2012 return user Your contributions are comparable if they are either: The same amount, or The same percentage of the annual deductible limit under the HDHP covering the employees. Taxact 2012 return user Comparable participating employees. Taxact 2012 return user   Comparable participating employees: Are covered by your HDHP and are eligible to establish an Archer MSA, Have the same category of coverage (either self-only or family coverage), and Have the same category of employment (either part-time or full-time). Taxact 2012 return user Excise tax. Taxact 2012 return user   If you made contributions to your employees' Archer MSAs that were not comparable, you must pay an excise tax of 35% of the amount you contributed. Taxact 2012 return user Employment taxes. Taxact 2012 return user   Amounts you contribute to your employees' Archer MSAs are generally not subject to employment taxes. Taxact 2012 return user You must report the contributions in box 12 of the Form W-2 you file for each employee. Taxact 2012 return user Enter code “R” in box 12. Taxact 2012 return user Medicare Advantage MSAs 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. Taxact 2012 return user To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare and have a high deductible health plan (HDHP) that meets the Medicare guidelines. Taxact 2012 return user A Medicare Advantage MSA is a tax-exempt trust or custodial savings account that you set up with a financial institution (such as a bank or an insurance company) in which the Medicare program can deposit money for qualified medical expenses. Taxact 2012 return user The money in your account is not taxed if it is used for qualified medical expenses, and it may earn interest or dividends. Taxact 2012 return user An HDHP is a special health insurance policy that has a high deductible. Taxact 2012 return user You choose the policy you want to use as part of your Medicare Advantage MSA plan. Taxact 2012 return user However, the policy must be approved by the Medicare program. Taxact 2012 return user Medicare Advantage MSAs are administered through the federal Medicare program. Taxact 2012 return user You can get information by calling 1-800-Medicare (1-800-633-4227) or through the Internet at www. Taxact 2012 return user medicare. Taxact 2012 return user gov. Taxact 2012 return user Note. Taxact 2012 return user You must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your tax return if you have a Medicare Advantage MSA. Taxact 2012 return user Flexible Spending Arrangements (FSAs) A health flexible spending arrangement (FSA) allows employees to be reimbursed for medical expenses. Taxact 2012 return user FSAs are usually funded through voluntary salary reduction agreements with your employer. Taxact 2012 return user No employment or federal income taxes are deducted from your contribution. Taxact 2012 return user The employer may also contribute. Taxact 2012 return user Note. Taxact 2012 return user Unlike HSAs or Archer MSAs which must be reported on Form 1040 or Form 1040NR, there are no reporting requirements for FSAs on your income tax return. Taxact 2012 return user For information on the interaction between a health FSA and an HSA, see Other employee health plans under Qualifying for an HSA, earlier. Taxact 2012 return user What are the benefits of an FSA?   You may enjoy several benefits from having an FSA. Taxact 2012 return user Contributions made by your employer can be excluded from your gross income. Taxact 2012 return user No employment or federal income taxes are deducted from the contributions. Taxact 2012 return user Withdrawals may be tax free if you pay qualified medical expenses. Taxact 2012 return user See Qualified medical expenses , later. Taxact 2012 return user You can withdraw funds from the account to pay qualified medical expenses even if you have not yet placed the funds in the account. Taxact 2012 return user Qualifying for an FSA Health FSAs are employer-established benefit plans. Taxact 2012 return user These may be offered in conjunction with other employer-provided benefits as part of a cafeteria plan. Taxact 2012 return user Employers have complete flexibility to offer various combinations of benefits in designing their plan. Taxact 2012 return user You do not have to be covered under any other health care plan to participate. Taxact 2012 return user Self-employed persons are not eligible for an FSA. Taxact 2012 return user Certain limitations may apply if you are a highly compensated participant or a key employee. Taxact 2012 return user Contributions to an FSA You contribute to your FSA by electing an amount to be voluntarily withheld from your pay by your employer. Taxact 2012 return user This is sometimes called a salary reduction agreement. Taxact 2012 return user The employer may also contribute to your FSA if specified in the plan. Taxact 2012 return user You do not pay federal income tax or employment taxes on the salary you contribute or the amounts your employer contributes to the FSA. Taxact 2012 return user However, contributions made by your employer to provide coverage for long-term care insurance must be included in income. Taxact 2012 return user When To Contribute At the
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Taxact 2012 return user Internal Revenue Bulletin:  2010-9  March 1, 2010  Rev. Taxact 2012 return user Proc. Taxact 2012 return user 2010-18 Table of Contents SECTION 1. Taxact 2012 return user PURPOSE SECTION 2. Taxact 2012 return user BACKGROUND SECTION 3. Taxact 2012 return user SCOPE SECTION 4. Taxact 2012 return user APPLICATION SECTION 5. Taxact 2012 return user EFFECTIVE DATE SECTION 6. Taxact 2012 return user DRAFTING INFORMATION SECTION 1. Taxact 2012 return user PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2010, including a separate table of limitations on depreciation deductions for trucks and vans; and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2010, including a separate table of inclusion amounts for lessees of trucks and vans. Taxact 2012 return user The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. Taxact 2012 return user SECTION 2. Taxact 2012 return user BACKGROUND . Taxact 2012 return user 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Taxact 2012 return user Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. Taxact 2012 return user The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Taxact 2012 return user This change reflects the higher rate of price inflation for trucks and vans since 1988. Taxact 2012 return user . Taxact 2012 return user 02 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Taxact 2012 return user The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Taxact 2012 return user Under § 1. Taxact 2012 return user 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. Taxact 2012 return user One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Taxact 2012 return user Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Taxact 2012 return user SECTION 3. Taxact 2012 return user SCOPE . Taxact 2012 return user 01 The limitations on depreciation deductions in section 4. Taxact 2012 return user 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2010, and continue to apply for each taxable year that the passenger automobile remains in service. Taxact 2012 return user . Taxact 2012 return user 02 The tables in section 4. Taxact 2012 return user 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2010. Taxact 2012 return user Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Taxact 2012 return user See Rev. Taxact 2012 return user Proc. Taxact 2012 return user 2005-13, 2005-1 C. Taxact 2012 return user B. Taxact 2012 return user 759, for passenger automobiles first leased before calendar year 2006; Rev. Taxact 2012 return user Proc. Taxact 2012 return user 2006-18, 2006-1 C. Taxact 2012 return user B. Taxact 2012 return user 645, for passenger automobiles first leased during calendar year 2006; Rev. Taxact 2012 return user Proc. Taxact 2012 return user 2007-30, 2007-1 C. Taxact 2012 return user B. Taxact 2012 return user 1104, for passenger automobiles first leased during calendar year 2007; Rev. Taxact 2012 return user Proc. Taxact 2012 return user 2008-22, 2008-12 I. Taxact 2012 return user R. Taxact 2012 return user B. Taxact 2012 return user 658, for passenger automobiles first leased during calendar year 2008; and Rev. Taxact 2012 return user Proc. Taxact 2012 return user 2009-24, 2009-17 I. Taxact 2012 return user R. Taxact 2012 return user B. Taxact 2012 return user 885, for passenger automobiles first leased during calendar year 2009. Taxact 2012 return user SECTION 4. Taxact 2012 return user APPLICATION . Taxact 2012 return user 01 Limitations on Depreciation Deductions for Certain Automobiles. Taxact 2012 return user (1) Amount of the inflation adjustment. Taxact 2012 return user (a) Passenger automobiles (other than trucks or vans). Taxact 2012 return user Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Taxact 2012 return user The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Taxact 2012 return user The new car component of the CPI was 115. Taxact 2012 return user 2 for October 1987 and 137. Taxact 2012 return user 851 for October 2009. Taxact 2012 return user The October 2009 index exceeded the October 1987 index by 22. Taxact 2012 return user 651. Taxact 2012 return user Therefore, the automobile price inflation adjustment for 2010 for passenger automobiles (other than trucks and vans) is 19. Taxact 2012 return user 66 percent (22. Taxact 2012 return user 651/115. Taxact 2012 return user 2 x 100%). Taxact 2012 return user The dollar limitations in § 280F(a) are multiplied by a factor of 0. Taxact 2012 return user 1966, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2010. Taxact 2012 return user This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2010. Taxact 2012 return user (b) Trucks and vans. Taxact 2012 return user To determine the dollar limitations for trucks and vans first placed in service during calendar year 2010, the new truck component of the CPI is used instead of the new car component. Taxact 2012 return user The new truck component of the CPI was 112. Taxact 2012 return user 4 for October 1987 and 140. Taxact 2012 return user 897 for October 2009. Taxact 2012 return user The October 2009 index exceeded the October 1987 index by 28. Taxact 2012 return user 497. Taxact 2012 return user Therefore, the automobile price inflation adjustment for 2010 for trucks and vans is 25. Taxact 2012 return user 35 percent (28. Taxact 2012 return user 497/112. Taxact 2012 return user 4 x 100%). Taxact 2012 return user The dollar limitations in § 280F(a) are multiplied by a factor of 0. Taxact 2012 return user 2535, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Taxact 2012 return user This adjustment applies to all trucks and vans that are first placed in service in calendar year 2010. Taxact 2012 return user (2) Amount of the limitation. Taxact 2012 return user Tables 1 and 2 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2010. Taxact 2012 return user Use Table 1 for a passenger automobile (other than a truck or van) and Table 2 for a truck or van placed in service in calendar year 2010. Taxact 2012 return user REV. Taxact 2012 return user PROC. Taxact 2012 return user 2010-18 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2010 Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Taxact 2012 return user PROC. Taxact 2012 return user 2010-18 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2010 Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 . Taxact 2012 return user 02 Inclusions in Income of Lessees of Passenger Automobiles. Taxact 2012 return user A taxpayer must follow the procedures in § 1. Taxact 2012 return user 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2010. Taxact 2012 return user In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 3 of this revenue procedure, while lessees of trucks and vans should use Table 4 of this revenue procedure. Taxact 2012 return user REV. Taxact 2012 return user PROC. Taxact 2012 return user 2010-18 TABLE 3 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2010 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $16,700 $17,000 3 7 10 11 14 17,000 17,500 4 8 13 15 16 17,500 18,000 5 10 16 19 21 18,000 18,500 6 13 18 23 26 18,500 19,000 7 15 22 26 31 19,000 19,500 8 17 25 30 35 19,500 20,000 9 19 29 34 39 20,000 20,500 10 21 32 38 44 20,500 21,000 11 23 35 42 48 21,000 21,500 12 26 38 45 53 21,500 22,000 13 28 41 50 57 22,000 23,000 14 31 46 56 63 23,000 24,000 16 36 52 63 73 24,000 25,000 18 40 59 71 81 25,000 26,000 20 44 66 78 90 26,000 27,000 22 49 71 86 100 27,000 28,000 24 53 78 94 108 28,000 29,000 26 57 85 101 118 29,000 30,000 28 61 92 109 126 30,000 31,000 30 66 97 117 135 31,000 32,000 32 70 104 125 144 32,000 33,000 34 74 111 132 153 33,000 34,000 36 79 117 140 161 34,000 35,000 38 83 123 148 171 35,000 36,000 40 87 130 156 179 36,000 37,000 42 92 136 163 188 37,000 38,000 44 96 143 170 198 38,000 39,000 46 100 149 179 206 39,000 40,000 48 105 155 186 215 40,000 41,000 50 109 162 194 224 41,000 42,000 52 113 169 201 233 42,000 43,000 54 118 174 210 241 43,000 44,000 56 122 181 217 251 44,000 45,000 58 126 188 225 259 45,000 46,000 60 131 194 232 269 46,000 47,000 61 135 201 240 277 47,000 48,000 63 140 207 248 286 48,000 49,000 65 144 213 256 295 49,000 50,000 67 148 220 263 304 50,000 51,000 69 153 226 271 313 51,000 52,000 71 157 232 279 322 52,000 53,000 73 161 239 287 331 53,000 54,000 75 166 245 294 340 54,000 55,000 77 170 252 302 348 55,000 56,000 79 174 258 310 358 56,000 57,000 81 178 265 318 366 57,000 58,000 83 183 271 325 375 58,000 59,000 85 187 278 333 384 59,000 60,000 87 191 284 341 393 60,000 62,000 90 198 294 352 406 62,000 64,000 94 207 306 368 424 64,000 66,000 98 215 320 382 443 66,000 68,000 102 224 332 398 460 68,000 70,000 106 232 346 413 478 70,000 72,000 110 241 358 429 496 72,000 74,000 114 250 371 444 513 74,000 76,000 118 258 384 460 531 76,000 78,000 122 267 396 476 549 78,000 80,000 126 276 409 491 566 80,000 85,000 132 291 432 518 598 85,000 90,000 142 313 464 556 643 90,000 95,000 152 334 497 594 687 95,000 100,000 162 356 528 634 731 100,000 110,000 177 388 577 691 798 110,000 120,000 196 432 641 768 887 120,000 130,000 216 475 705 846 976 130,000 140,000 236 518 770 922 1,065 140,000 150,000 256 561 834 1,000 1,154 150,000 160,000 275 605 898 1,077 1,243 160,000 170,000 295 648 963 1,153 1,333 170,000 180,000 315 691 1,027 1,231 1,421 180,000 190,000 334 735 1,091 1,308 1,510 190,000 200,000 354 778 1,155 1,386 1,599 200,000 210,000 374 821 1,220 1,462 1,688 210,000 220,000 393 865 1,284 1,539 1,777 220,000 230,000 413 908 1,348 1,617 1,866 230,000 240,000 433 951 1,413 1,693 1,956 240,000 and up 453 995 1,476 1,771 2,044 REV. Taxact 2012 return user PROC. Taxact 2012 return user 2010-18 TABLE 4 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2010 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later 17,000 17,500 3 6 9 10 11 17,500 18,000 4 8 12 14 16 18,000 18,500 5 10 15 18 21 18,500 19,000 6 12 19 22 24 19,000 19,500 7 15 21 26 29 19,500 20,000 8 17 25 29 34 20,000 20,500 9 19 28 33 38 20,500 21,000 10 21 31 37 43 21,000 21,500 11 23 35 41 47 21,500 22,000 12 25 38 45 51 22,000 23,000 13 29 42 51 58 23,000 24,000 15 33 49 58 67 24,000 25,000 17 37 56 66 76 25,000 26,000 19 42 62 73 85 26,000 27,000 21 46 68 82 93 27,000 28,000 23 50 75 89 103 28,000 29,000 25 55 81 97 111 29,000 30,000 27 59 88 104 121 30,000 31,000 29 63 94 113 129 31,000 32,000 31 68 100 120 138 32,000 33,000 33 72 107 127 148 33,000 34,000 35 76 114 135 156 34,000 35,000 37 81 119 143 165 35,000 36,000 39 85 126 151 174 36,000 37,000 41 89 133 158 183 37,000 38,000 43 94 139 166 191 38,000 39,000 45 98 145 174 201 39,000 40,000 47 102 152 182 209 40,000 41,000 49 106 159 189 218 41,000 42,000 51 111 164 198 227 42,000 43,000 53 115 171 205 236 43,000 44,000 55 119 178 213 245 44,000 45,000 57 124 184 220 254 45,000 46,000 59 128 190 228 263 46,000 47,000 60 133 197 235 272 47,000 48,000 62 137 203 244 280 48,000 49,000 64 142 209 251 290 49,000 50,000 66 146 216 259 298 50,000 51,000 68 150 223 266 308 51,000 52,000 70 154 229 275 316 52,000 53,000 72 159 235 282 325 53,000 54,000 74 163 242 290 334 54,000 55,000 76 167 249 297 343 55,000 56,000 78 172 254 305 352 56,000 57,000 80 176 261 313 361 57,000 58,000 82 180 268 320 370 58,000 59,000 84 185 274 328 378 59,000 60,000 86 189 280 336 388 60,000 62,000 89 195 291 347 401 62,000 64,000 93 204 303 363 418 64,000 66,000 97 213 315 379 436 66,000 68,000 101 221 329 394 454 68,000 70,000 105 230 341 410 472 70,000 72,000 109 239 354 424 490 72,000 74,000 113 247 367 440 508 74,000 76,000 117 256 380 455 526 76,000 78,000 121 264 393 471 543 78,000 80,000 125 273 406 486 561 80,000 85,000 131 289 428 513 592 85,000 90,000 141 310 461 552 636 90,000 95,000 151 332 492 591 681 95,000 100,000 161 353 525 629 726 100,000 110,000 176 386 573 686 793 110,000 120,000 195 430 637 763 882 120,000 130,000 215 473 701 841 971 130,000 140,000 235 516 766 918 1,059 140,000 150,000 255 559 830 995 1,149 150,000 160,000 274 603 894 1,072 1,238 160,000 170,000 294 646 958 1,150 1,326 170,000 180,000 314 689 1,023 1,226 1,416 180,000 190,000 333 733 1,087 1,303 1,505 190,000 200,000 353 776 1,151 1,381 1,594 200,000 210,000 373 819 1,216 1,457 1,683 210,000 220,000 392 863 1,280 1,534 1,772 220,000 230,000 412 906 1,344 1,612 1,861 230,000 240,000 432 949 1,409 1,689 1,949 240,000 and up 452 992 1,473 1,766 2,039 SECTION 5. Taxact 2012 return user EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010. Taxact 2012 return user SECTION 6. Taxact 2012 return user DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Taxact 2012 return user Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Taxact 2012 return user For further information regarding this revenue procedure, contact Mr. Taxact 2012 return user Harvey at (202) 622-4930 (not a toll-free call). Taxact 2012 return user Prev  Up  Next   Home   More Internal Revenue Bulletins