HSA with Medicare

HSAs (Health Savings Accounts) are accounts for individuals with high-deductible health plans (HDHPs).  Contributions to HSAs are tax deductible up to an annual limit, and distributions made to cover out-of-pocket medical costs are not taxed.

If you enroll in Medicare Part A and/or B during the year, you can no longer contribute pre-tax dollars to your HSA. However, if you are approaching Medicare enrollment, we suggest you make your full annual contribution before Medicare begins. You will be able to utilize all of your funds, just not make any additional contributions.

If you choose to delay Medicare enrollment because you are still working and want to continue contributing to your HSA, you must also wait to collect Social Security retirement benefits. This is because most individuals who are collecting Social Security benefits when they become eligible for Medicare are automatically enrolled into Medicare Part A. You cannot decline Part A while collecting Social Security benefits.

Finally, if you decide to delay enrolling in Medicare, make sure to stop contributing to your HSA at least six months prior to Medicare enrollment. When you enroll in Medicare Part A, you receive up to six months of retroactive coverage, not going back farther than your initial month of eligibility. If you do not stop HSA contributions at least six months before Medicare enrollment, you may incur a tax penalty.

Unexpected Loss Financial Checklist

Losing a loved one can be overwhelming and challenging. In the event of an unexpected loss you can turn to The Hopkins Group for guidance and support. A checklist of important financial obstacles is a good place to start and we are here to help you during this difficult time.

  • Family attorney, CPA and Investment Advisor: Consult your trusted team to help settle your loved one’s estate and any final instructions that must be accommodated.
  • File the deceased’s Final Tax Return. Ensure that the executor of the estate has the information necessary to file final income tax returns. Consult with your CPA regarding the requirements for filing estate or trust income tax returns and estate tax returns.  While the 2020 federal estate tax limit is $11.58 million (more if your spouse died previously and you elected portability), the states often have much lower limits for filing.
  • Documents: Locate and review any Estate documents including a will, trust and power of attorney. Gather Financial documents including: stock certificates, title documents, bearer bonds, bank statements, brokerage statements, deeds, prenuptial agreement, life insurance policies, bank accounts, investment accounts, real-estate ownership, retirement accounts, business ownership, mortgages, owed taxes, credit card debt, unpaid bills, keys to a safe deposit box or home safe.  Collect important Personal documents including: birth certificate, marriage and divorce certificates and Social Security information.
  • Contact Employer: Determine if any outstanding compensation is due. Find out whether surviving dependents are still eligible for health or insurance benefits and whether there is a life insurance policy through the company. Let them know about benefits due to beneficiaries. Check their retirement or pension plans. Notify your employer if this is a death of a spouse which may be a “life event” that may trigger benefit decisions.
  • Social Security Administration (SSA): Contact the SSA and any other agency that might be making monthly payments to the deceased. Depending on circumstances, survivor benefits could be payable to you.
  • Veterans Administration (VA): Contact the VA if necessary, they may cover death, burial and memorial benefits. They will also stop any monthly payments that the deceased may have been receiving.
  • Heath and Life Insurance: Contact companies as soon as possible.
  • Change names: Change all property titles and remove your spouse’s name and update insurance policies. Change titles on all jointly-held bank, investment, and credit accounts. Close accounts that were in your spouse’s name only.
  • Credit Bureaus: Send a letter to all 3 major Credit Bureaus and get a copy of your loved one’s credit reports so you’re aware of all debts. The 3 major credit bureaus are EquifaxExperian, and TransUnion. Ask to have a notification in the credit report that says “Deceased – do not issue” so new credit is not taken out in their name.
  • Credit Cards: Notify credit card companies and pay off balances. Work with creditors to pay off any outstanding balances. Usually, the executor of the estate will handle debt liquidation. You are not personally liable for your loved one’s debts unless you’re married (for some debts) or are a co-signer on a loan.
  • College Loans: Call the financial aid office if you have a child in college, you may qualify for more assistance.
  • Utilities: Discontinue if the home will be vacated, ensure that utilities are shut off.
  • Mail: Arrange for the Post Office to forward mail if needed to the executor of the estate.

Document Scanning

Ready to start scanning your documents? There is an app for that too! Clients have personally recommended the CamScanner Basic free app that turns your mobile device into a document scanner and allows you to take a photograph of a document, convert it into a PDF and upload it to a cloud storage service such as Dropbox or email it to yourself and others.  Please note that The Hopkins Group will be implementing SmartVault as its secure, document-sharing platform for this tax season.  More details to follow.

ARTICLE: 6 of the Best Document Scanner Apps 

Retirement Accounts

Changes made by the 2019 SECURE Act to required minimum distributions (RMDs) may affect your retirement accounts. If you turn 70½ after 2019, you can now wait until age 72 to start taking mandated annual withdrawals from your retirement accounts. Updated life expectancy tables proposed by the IRS for 2021 would change how you calculate those amounts. Also, children who draw on a deceased parent’s retirement account now have 10 years to withdraw, effective for distributions starting in 2020.  If you inherited an IRA from an account holder who passed away prior to January 1, 2020, you can continue the current distribution schedule.

The new law also impacts Sec 529 accounts.  Tax-free distributions now include up to $10,000 for repayment of qualified student loans, and expenses for certain apprenticeship programs.  This change was made retroactive to distributions after December 31, 2018.

529 Plans

Now is the time to make a 529 plan contribution before year-end for your child or grandchild!

  • Earnings on assets in a 529 plan are tax-deferred and if the distributions are qualified withdrawals for higher education expenses, they are federally tax free plus tax free in your home state in most cases. Qualified distributions: tuition, room & board, and other related expenses.
  • 529 benefits can now be used to pay for tuition of up to $10,000/yr at elementary and secondary public, private or parochial schools. Tax deduction is possible in over 30 states, including VA, MD and D.C.
  • Plan contributions are gifts from the taxpayer to the 529 beneficiary. The annual gift limit is $15,000/beneficiary ($30,000 if married). You are able to contribute an amount equal to five years of gifts in just one year (up to $75,000, $150,000 for a married couple) with zero gift tax liability.

College Tax Deductions

Certain qualified education expenses paid during the year can be deducted. A maximum annual credit of $2,500 is available per eligible student for tuition, fees and other necessary costs. To receive the tax benefit you must have paid for qualified education expenses for a college student (yourself, a dependent or a spouse). To claim the credit your modified adjusted gross income (MAGI) must be $80,000 or less ($160,000 or less for married filing jointly). You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly). You don’t qualify for the deduction if your MAGI is over $90,000 ($180,000 for joint filers) or if you and your spouse are filing separate taxes.  If your MAGI is over the threshold, it is possible for your student to claim the credit if proper planning is done.