By failing to plan ahead, you will find that most of your medical expenses are worthless on your tax return. With a little planning, you can prevent this. If you fail to plan ahead, you will struggle to claim your medical expenses as an itemized deduction when April 15th arrives. You will lose the ability to deduct the bulk of these expenses because they need to surpass 10% of your Adjusted Gross Income (AGI) to be usable as an itemized deduction . This means that taxpayers who make $100,000 during the year will not be able to deduct the first $10,000 in medical expenses. That handicap essentially means you will not be able to deduct any medical expenses, unless you incur heavy medical bills in a single year. And if you are paying AMT (the Alternative Minimum Tax) - don't even think about it. When it comes time to pay your income tax bill, most Americans want to pay the lowest amount possible. One of the ways taxpayers seek to do this is by increasing the number of deductions they take on their tax return each year. So it's not surprising that one of the common questions we receive from our clients is whether or not they can deduct their medical expenses. While the simple answer is "yes," the reality for most taxpayers is "no." However, with a little planning, that answer can be "yes." If you fail to plan ahead, you will struggle to claim your medical expenses as an itemized deduction when April 15th arrives. You will lose the ability to deduct the bulk of these expenses because they need to surpass 10% of your Adjusted Gross Income (AGI) to be usable as an itemized deduction . This means that taxpayers who make $100,000 during the year will not be able to deduct the first $10,000 in medical expenses. That handicap essentially means you will not be able to deduct any medical expenses, unless you incur heavy medical bills in a single year. And if you are paying AMT (the Alternative Minimum Tax) - don't even think about it. The best way to counteract this nasty little piece of the tax code is to set up an HSA (Health Savings Account) and contribute to it each year. When you contribute to an HSA you get the privilege of deducting the amount of your contributions from your income and you bypass the 10% threshold. You can do this even if you don't choose to itemize your deductions! And as an added bonus (do we sound like an infomercial?) - the money you put into your HSA, as well as the earnings of the account, can be taken out tax free as long as they are used for qualified medical expenses. While you cannot pay your health insurance premiums with funds from an HSA, you can pay most other medical expenses. Additionally, once you turn 65 you can use the HSA to pay your Medicare or other healthcare premiums. Requirements for an HSA In order to qualify for an HSA you must have a high-deductible health plan - defined as a healthcare plan with: 1 An annual deductible of at least $1,350 for individual coverage or at least $2,700 for family coverage. 2 Maximum annual out-of-pocket expenses of $6,750 for individual coverage and $13,500 for family coverage. Once you have your HSA set up you can contribute up to $3,500 per year for individual coverage and $7,000 for family coverage. If you are over the age of 55 you can contribute an additional $1,000 annually. Save as PDF Read More Articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us. Avoiding the 10% Threshold for Medical Expenses How do you setup an HSA? If your employer offers a high-deductible health plan, they should also give you the ability to contribute to an HSA. You can also open an account on your own through a qualified HSA provider, such as a bank or insurance company (go to www.hsasearch.com for a list of qualified HSA providers). What happens if you don't plan ahead? So what is the solution? Key Takeaways If you don't plan ahead and contribute to a Health Savings Account then you will find that most, if not all, of your medical expenses will be ineligible for a deduction due to the 10% threshold that must be met before deducting medical expenses. By setting up and contributing to a Health Savings Account you can deduct your full contribution to the account and have the flexibility to pay your medical bills with tax-free withdrawals from the account.

2019 Pricing Click Here To Schedule A Meeting

Mahlon Mitchell shares his experience working with Monotelo Advisors

Social unrest, unemployment, COVID 19, the election… there are a multitude of items we could address in our October update. While there are a multitude of things we could address, I want to focus today’s discussion on the bond market. The reason why I want to focus on bonds is because bonds play a critical role in running a balanced portfolio. The inverse relationship that stocks and bonds have experienced in the past has allowed investors to structure portfolios with higher levels of stability. That’s because bonds have historically acted as a shock absorber. When stocks were down, bonds were usually up and when stocks were up, bonds were oftentimes down. However, the “shock absorber” role that bonds have played to offset stock market risk can no longer be relied upon, so this requires a major shift in our thinking. Executive Summary With stock market valuations near all-time highs, the risk of a stock market correction is heightened. The fixed income side of a balanced portfolio (the bonds) will no longer provide protection against a correction in the equity markets. Declining rates have removed most of the income from bond portfolios and have added significant risks if rates were to rise. Bonds (and “balanced portfolios” that hold bonds) may face significant headwinds in the future. Finding solutions to this real problem is key to achieving your long-term goals. What’s Changed? As global interest rates have declined over the past 12 months, the search for income has become incredibly challenging. We believe that one of the biggest sources of protection to the traditional 60/40 portfolio (60% stocks, 40% bonds), has now become a risk. A 40% allocation to a mixture of Treasury bonds and high-quality corporate bonds has historically served investors well. That’s because bonds were effective at creating income, providing a diversified source of return and providing capital preservation in times of uncertainty. But we believe core fixed income is not equipped to meet these goals going forward. After four decades of declining interest rates and the massive fiscal and monetary response to the health crisis, rates are hovering near zero throughout the world. Not only do low rates rob investors of needed income, the historic assumption that bonds will provide a form of protection is no longer valid. Income If you search for income in today’s bond market, prepare for a long, unfruitful journey. Domestic and global bond indices yield between .6% and 1.2% across the globe. Where exactly is the income in core fixed income? Rates have steadily declined for the past few decades, but have significantly declined over the past 12 months — and there is little room left for rates to fall much further Rates have been falling for nearly four decades, but the collapse in interest rates over the last 12 months have left little room for rates to fall much further. The end result is that bond prices have a limited capacity to rise. Not only is there little room for bond prices to rise, there is tremendous room for bond prices to fall, especially if interest rates rise in the future. In the interest of full disclosure, rising interest rates in the near term is not a major concern of ours. We are simply stating that there is significant downside risk with little upside reward. This can be observed by the chart below. If rates rise, all the return that was recently captured by the bond market from price appreciation (the black area), is likely to be given back by price depreciation. Interest rates can do three things in the future. They can go up. They can go down. Or they can stay the same. If rates stay the same, we collect a paltry 1% yield on our bond portfolio and our bond prices remain stable. If interest rates go down, we collect the 1% yield with a small amount of price appreciation (because rates cannot fall very far from 1% unless they go negative). And if they go up, we collect our 1% yield, but we are subject to significant risk of price declines. Not a whole lot of upside, but quite a bit of downside risk! Unlike stocks, which theoretically have unlimited upside potential, bond returns are capped by the amount of interest income they produce over the life of the investment. For example: If you bought a 10-year treasury with a 5% yield back in 2000, your bond would produce 50% income over the 10-year life of the bond (10 years of coupon payments * 5% yield = 50%). If rates were to go to zero, your bond would go from a price of par (100) to 150. It could not go above the 150 unless rates went below zero. If you bought a 10-year treasury bond in today’s world at a 1% yield, and interest rates dropped to zero tomorrow, your 10-year treasury would now be worth 110 (1% yield for 10 years in a 0% interest rate environment = 10 points of price appreciation). Your bond could not go above 110 unless interest rates dropped below zero. If instead of rates falling, rates began rising, that price change we just described would turn into price depreciation. And bond prices have way more room to move down rather than up when you are beginning at a 1% yield. That is why bonds have higher levels of risk today than ever before. But it’s not just bonds that have increased sensitivity to interest rates. The performance of the tech and consumer discretionary sectors have also benefitted from our low-rate environment. These sectors now make up a much larger portion of the overall market, and that means that equity portfolios may also be sensitive to rising interest rates. Diversification Bonds have been a pretty effective hedging tool against past stock market corrections. When equity markets experienced signs of turmoil, central banks generally stepped in to lower rates, and bond prices responded positively to the new, lower interest rates. We believe that this relationship can no longer be relied upon, because there’s very little room to lower rates further. That means one of the most-valuable diversification benefits of holding bonds is severely diminished. Inflation It’s very difficult to accurately predict future inflation, but we can say this: if inflation were to resurface, bonds will not do well. The paltry income will not offset the purchasing power risk, and bond prices will decline when interest rates rise. In Summary With interest rates near zero, the upside of holding bonds is low, and the downside of holding bonds is high. The one reason to hold high-quality bonds in today’s environment is that they will be one of the few assets to hold their value if we see another significant equity market correction. In times of uncertainty, high-quality bonds will always be the preferred asset. While that is a very good reason to hold bonds, the other risks of holding a traditional bond portfolio have become too great to ignore. Not only has income diminished significantly from a traditional bond portfolio, bonds may no longer provide the needed buffer during times of economic turmoil and they face greater downside risk in scenarios when interest rates rise. If core fixed income is no longer able to serve the role it has played in the past, investors will need to use different approaches to accomplish their goals. If you would like to explore options that can help reduce the risks we mentioned here, register for our November webinar or schedule a no-obligation 20-minute strategy call and we can provide more insight into potential solutions. Read more articles THE HIGH RISK OF OWNING BONDS TODAY Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

The road to retirement has many curves and directional changes. You are likely to switch jobs over time and you may need to move your retirement funds to a different advisor or a different custodian. Should the need for change come, you will want to be sure that everything is done correctly. Rolling Five Things According to the Bureau of Labor Statistics, the average worker currently holds ten different jobs before age forty, and this number is projected to grow. The BLS also reported that the median employee tenure is between 4.0 and 4.3 years with men lasting a little longer than women. Each job change brings the potential need to roll over retirement funds, which can be tricky with serious consequences if not done correctly. With job changes as frequent as they are today, it's important to understand how to roll over retirement funds correctly. Here are 5 things every IRA owner needs to know before they decide to roll over an IRA. Knowing this might get confusing, let us start with the end in mind: Rollover rules are complicated with a number of potential pitfalls. The best strategy is to use transfers and direct rollovers. The simplest way to think about this is "don't touch the money." 1. How rollovers work An “indirect rollover” takes place when a distribution is made to you from your company retirement plan or an IRA and you take receipt of those funds with the intention of putting them back into a different or newly established IRA. A "direct rollover" takes place when a company plan transfers your assets to another company plan or an IRA. While this transaction is called a "rollover," it is very different from an indirect rollover because you never take receipt of the funds. This type of rollover avoids the mandatory 20% withholding that applies to rollover-eligible distributions because this is not a taxable event to the IRA owner. 2. The 60-day rule There is a 60-day window to complete an indirect rollover, and the 60-day clock starts ticking when the distribution is received. You can use those funds for any purpose during that window, but the distribution becomes taxable and subject to penalties if the deadline is missed. While there are some very limited exceptions, if the deadline is missed, the rollover window is closed. To avoid this outcome, complete rollovers as soon as possible. 3. The once-per year rollover rule IRA-to-IRA or Roth-to-Roth rollovers are subject to a once-per-year rule. For purposes of this rule, traditional and Roth IRAs are combined. This means that a distribution and subsequent rollover between your Roth IRAs will prevent another rollover within a one-year period between either your traditional IRAs or other Roth IRAs. This rule limits you to only one rollover of IRA funds every 12 months. Rollovers from a company plan to an IRA or from an IRA to a company plan are not subject to the once-per year rollover rule because they are transfers. Roth conversions are not subject to the rule either. 4. No Rollover of RMDs Once you turn 70 ½ you must take out a required minimum distribution (RMD) from your IRA each year. RMDs cannot be rolled over and must be reported as income. You can take out distributions in excess of the RMD and roll them over but not until you have distributed the RMD. This rule does not apply to transfers between IRAs. You can transfer your entire account to a new IRA and then take the RMD later. 5. Other Rollover Pitfalls There are other rollover pitfalls to be aware of. Non-spouse beneficiaries attempting to rollover retirement funds is not allowed. If a non-spouse beneficiary receives a distribution from an IRA or a company plan, they may not roll over those funds, they are taxable at the time of distribution. That Every IRA Owner Should Know Summary Rollover rules are complicated. The simplest solution is to use transfers and direct rollovers, and not touch the money. If you never personally receive a distribution, and all moves are made between the old and newly established IRA, you have very little to worry about. That's because transfers avoid the 60-day rule and the once-per-year rollover rule, so there is no concern about missed deadlines or frequency of transfers. Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

Our observations on how the Tax Cuts and Jobs Act actually impacted our clients in 2018. 1 2 The Tax Cuts and Jobs Act that was enacted by congress last year was the biggest change to the tax code our country has seen in 30 years. We have talked about how the changes would impact you, our clients in past correspondence; so we thought it might be helpful to share our perspective now that the first tax season under the new laws is behind us. Comparing our client’s 2017 and 2018 tax returns, here are our main observations on how Monotelo clients’ returns changed from 2017 to 2018: Average income increased 4% from 2017 to 2018 Total taxes paid decreased by an average $564 per return filed The average effective tax rate decreased from 11.09% to 10.42% Federal refunds on average decreased $1,729 What’s most notable about the data we just shared is the fact that the lion’s share of our clients paid less income tax in 2018 than they paid in 2017 (and that includes the fact that you made more money in 2018), yet you received a smaller refund around tax time. People often assume that a smaller refund means the government is keeping more of your money, but that assumption would be wrong. Your tax refund is simply the difference between what you paid to the government throughout the year and what you should have paid. A tax refund is a good metric for how accurate your tax payments were, but not a good metric for how much you actually paid in taxes. Despite lower refunds, our clients actually paid $564 less in taxes than they did in 2017, while they made more money. With the average effective tax rate (actual taxes paid as a percentage of total income received) dropping from 11.09% to 10.42%, the biggest factor was the new tax brackets. Many taxpayers who were previously in the 15% or 25% brackets moved into the 12% or 22% brackets after the tax reform. If our clients payed a lower percentage of their income in taxes, and payed a lower dollar amount in taxes, then why was there such a significant drop in the average refund amount from the prior year? The primary factor that contributed to the lower refunds is the changes that were made to the withholding tables that calculate the federal tax to withhold from your paychecks. The main reason people were receiving larger tax refunds in prior years was due to the fact that the withholding tables were skewed to put more money in the hands of the government over the course of the year. The prior withholding tables did not properly account for the various deductions that taxpayers could take on their returns, and simply assumed that the taxpayer would be taking the standard deduction. With the standard deduction increasing significantly in 2018, a larger percentage of taxpayers utilized the standard deduction, and did not itemize. This single change caused the withholding tables to more accurately calculate the correct amount of federal withholding, and put more money into the pockets of taxpayers throughout the year. Lower withholding means more money in each paycheck. On average our clients had $2,300 fewer dollars taken out of their checks in 2018 than they did in 2017. The bad news is that some people were relying on the larger refunds, and didn’t realize that their raise came in each check they collected throughout the year. Takeaways Overall, our clients faired pretty well under the Tax Cuts and Jobs Act. The majority of our clients paid a lower percentage of their income in taxes. For those who paid significantly more tax in 2018 than they paid in 2017, it was usually due to a large increase in income. While most taxpayers received lower refunds than prior years, this was largely due to decreases in their federal withholdings, not because they had a larger tax bill to pay. As we approach the midpoint of 2019, now is a great time to review the tax withholdings from your paycheck to ensure you do not owe at the end of the year. If you are concerned about owing on your 2019 tax return or would like an idea of what refund you can expect next year, give us a call and we can provide you with some guidance. THE IMPACT of the Tax Cuts and Jobs Act Read more articles Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

TAXPAYERS IN ILLINOIS can maximize the tax benefits of their charitable donations by giving to Scholarship Granting Organizations (SGOs). SGOs are non-profit organizations that are approved by the Illinois Department of Revenue to receive qualified contributions from individuals and businesses to be disbursed to qualified, non-public schools in Illinois in the form of scholarships to eligible Illinois students. The Invest In Kids scholarship program offers a 75 percent income tax credit to individuals and businesses that contribute to SGOs. This tax credit provides a significant benefit over traditional charitable giving. Read More View Examples of How This Credit Works Schedule a Free Consultation View on Form Schedule Your No-Obligation Consultation on How To Increase The Impact and Tax Benefits of Your Charitable Giving

WHAT PARENTS NEED TO KNOW About Back-To-School Expenses August can be an expensive month for families with children heading back to school... and some of these expenses may serve you on your tax return. So we are going to spend five minutes summarizing a few of the expenses worth paying attention to. Tax Deductions for School Fundraisers If you make donations to your child's public school, you may be able to deduct the donation amount from your taxable income as a charitable donation. If you receive something in return for your donation, then the reasonable value of the property you receive must be subtracted before you take the deduction. For example: you donate $250 to your child's sports team, and you receive a sweatshirt that sells for $25. In this situation, you would subtract the $25 value of the sweatshirt and use the remaining $225 as a charitable deduction. After-school activities and Child Care Credit For a child under the age of 13, the cost of before or after school care may qualify for a tax credit. Your child must be attending the program so that you can work, look for work, or go to school. The program must also be considered "child care," so hour-long tutoring sessions don't qualify. American Opportunity Tax Credit The American Opportunity Tax Credit can amount to $2,500 in tax credits per eligible student and is available for the first four years of post-secondary education. Eligible expenses include tuition, books and required supplies. Room and board, medical expenses and insurance do not qualify for the AOTC. Income limits apply and the credit requires a 1098-T. The American Opportunity Tax Credit for education expenses can reduce your tax bill by up to $2,500 Lifetime Learning Credit The Lifetime Learning Credit can create up to $2,000 in tax credits for qualified education expenses. The credit is for 20% of the qualified education expenses (up to $10,000 in tuition and fees). There is no limit on the number of years this credit can be claimed and you may be able to deduct qualified education expenses paid for yourself, your spouse, or your dependents. The deduction phases out after certain income ranges. Tuition and Fees Deduction The tuition and fees deductions can reduce the amount of your taxable income by $4,000. This deduction is claimed as an adjustment to income, so you can claim this deduction even if you don't itemize deductions on your Schedule A. This deduction may help you if you don't qualify for the American Opportunity or Lifetime Learning credits. The qualified expenses are for undergraduate, graduate or post graduate courses. There is no limit to the number of years the credit can be claimed and you may be able to deduct qualified education expenses paid for yourself, your spouse, or your dependent(s), but the deduction phases out after a certain income range. You must file jointly with your spouse to claim this credit. At Monotelo, we exist to make a difference with meaningful and actionable financial solutions that positively impact our client's lives. If you have questions about what steps you can be taking to prepare for your retirement years, call us at 800-961-0298

Tax and Financial Planning | Monotelo Advisors | 800-961-0298 2205 Point Boulevard, Suite 175, Elgin, IL 60123 Find the location that works best for you. Elgin Office 2250 Point Boulevard Suite 210 Elgin, IL 60123 Phone: 847-923-9015 Fax: 847-929-9134 Mon-Fri: 9:00 AM - 5:00 PM Get Directions Call Office Site Title Carlinville Office 260 Alton Rd Carlinville, IL 62626 Phone: 217-854-9530 Fax: 217-854-5206 Wed/Thurs: 8 AM - 3 PM Get Directions Call Office Gillespie Office 112 S Macoupin St Gillespie, IL 62033 Phone: 217-839-4226 Fax: 217-839-4039 Mon-Fri: 8:00 AM - 3:00 PM Get Directions Call Office West Brooklyn Office 2508 Johnson Street West Brooklyn, IL 61378 Phone: 815-628-3500 Fax: 815-628-3600 Mon-Fri: 8:30 AM - 5:00 PM Get Directions Call Office Get Directions Call Office

Going to an office is no longer a requirement of conducting business in the age of the internet, cell phones, Skype and GoTo meetings. OCTOBER 2017 MONOTELO QUARTERLY Quarterly: Oct 17 UNLOCKING the Missed Deductions of a Home Office Small-business owners should not miss the benefit of a home office deduction out of fear of a tax audit. Going to an office is no longer a requirement of conducting business in the age of the internet, cell phones, Skype and GoTo meetings. This means an increasing number of small-business owners are working from home, and eligible to claim a home office deduction. When Properly implemented, this deduction can make a significant difference in your tax liability. WHAT CONSTITUTES A HOME OFFICE? In order to claim a deduction for a home office the IRS requires that a designated space be used exclusively and regularly for business. Going to an office is no longer a requirement of conducting business in the age of the internet, cell phones, Skype and GoTo meetings. Exclusively used for business means it cannot ever be used for personal reasons during the tax year, this includes any type of storage for personal items. Although the office is to be used only for business, the tax code does not mandate that it be a separate room, it can be part of a room - walls are not a requirement. The office must also be used on a regular basis for business. HOW TO DEDUCT EXPENSES FOR THE HOME OFFICE There are two different methods you can use to claim a home office deduction, the actual expense method and the simplified method. ACTUAL EXPENSE METHOD The actual expense method allows you to deduct all direct expenses and a portion of any indirect expenses. Direct expenses are any expenses incurred specifically for the home office, such as painting the office or putting in new carpet. Indirect expenses include any expenses incurred for the home such as mortgage interest, property taxes and utilities. To claim these indirect expenses you need to determine the portion of the expenses that relate to the home office. This can be calculated by dividing the square footage of the office by the square footage of the house. You can also claim depreciation or a rent deduction for the part of the home used for business purposes. On the downside, when you sell the home any depreciation taken needs to be recaptured. This can be an unpleasant surprise come tax time. When using the actual expense method, detailed records and supporting documentation must be kept for all expenses. SIMPLIFIED METHOD If you prefer not to maintain records of these expenses, you can still take a home office deduction using the simplified method. The simplified method is calculated by simply multiplying the square footage of the office by $5 per square foot (up to 300 sq. ft.). The advantage to this method is the IRS does not require you to keep any records that are required by the actual expense method. The main drawback of the simplified method is that you will not be able to deduct your actual expenses if they exceed the allowance of the simplified method. The best solution is to keep track of all of your expenses and then determine at the end of the year which method will provide the greater deduction. MILEAGE Regular commuting to and from work is not a deductible expense, however travel between your primary office located in your home to your second office is classified as business miles that are deductible. This does not mean that you can set up a "home office" to deduct your regular commuting miles. It means that if your home office is where you conduct the majority of your business, you can deduct any mileage to a secondary location. Setting up a home office can potentially create several thousands of dollars in deductible mileage each year. TAKE AWAY Even the smallest home office can unlock significant deductions if the expenses are properly accounted for using either the actual or simplified method. It is very important that the space be used exclusively for business purposes. July 2017 Save as PDF May 2018

Small Business Retirement Planning Schedule Your Retirement Planning Call

By failing to plan ahead, you will find that most of your medical expenses are worthless on your tax return. With a little planning, you can prevent this. If you fail to plan ahead, you will struggle to claim your medical expenses as an itemized deduction when April 15th arrives. You will lose the ability to deduct the bulk of these expenses because they need to surpass 10% of your Adjusted Gross Income (AGI) to be usable as an itemized deduction . This means that taxpayers who make $100,000 during the year will not be able to deduct the first $10,000 in medical expenses. That handicap essentially means you will not be able to deduct any medical expenses, unless you incur heavy medical bills in a single year. And if you are paying AMT (the Alternative Minimum Tax) - don't even think about it. When it comes time to pay your income tax bill, most Americans want to pay the lowest amount possible. One of the ways taxpayers seek to do this is by increasing the number of deductions they take on their tax return each year. So it's not surprising that one of the common questions we receive from our clients is whether or not they can deduct their medical expenses. While the simple answer is "yes," the reality for most taxpayers is "no." However, with a little planning, that answer can be "yes." If you fail to plan ahead, you will struggle to claim your medical expenses as an itemized deduction when April 15th arrives. You will lose the ability to deduct the bulk of these expenses because they need to surpass 10% of your Adjusted Gross Income (AGI) to be usable as an itemized deduction . This means that taxpayers who make $100,000 during the year will not be able to deduct the first $10,000 in medical expenses. That handicap essentially means you will not be able to deduct any medical expenses, unless you incur heavy medical bills in a single year. And if you are paying AMT (the Alternative Minimum Tax) - don't even think about it. The best way to counteract this nasty little piece of the tax code is to set up an HSA (Health Savings Account) and contribute to it each year. When you contribute to an HSA you get the privilege of deducting the amount of your contributions from your income and you bypass the 10% threshold. You can do this even if you don't choose to itemize your deductions! And as an added bonus (do we sound like an infomercial?) - the money you put into your HSA, as well as the earnings of the account, can be taken out tax free as long as they are used for qualified medical expenses. While you cannot pay your health insurance premiums with funds from an HSA, you can pay most other medical expenses. Additionally, once you turn 65 you can use the HSA to pay your Medicare or other healthcare premiums. Requirements for an HSA In order to qualify for an HSA you must have a high-deductible health plan - defined as a healthcare plan with: 1 An annual deductible of at least $1,350 for individual coverage or at least $2,700 for family coverage. 2 Maximum annual out-of-pocket expenses of $6,750 for individual coverage and $13,500 for family coverage. Once you have your HSA set up you can contribute up to $3,500 per year for individual coverage and $7,000 for family coverage. If you are over the age of 55 you can contribute an additional $1,000 annually. Save as PDF Read More Articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us. Avoiding the 10% Threshold for Medical Expenses How do you setup an HSA? If your employer offers a high-deductible health plan, they should also give you the ability to contribute to an HSA. You can also open an account on your own through a qualified HSA provider, such as a bank or insurance company (go to www.hsasearch.com for a list of qualified HSA providers). What happens if you don't plan ahead? So what is the solution? Key Takeaways If you don't plan ahead and contribute to a Health Savings Account then you will find that most, if not all, of your medical expenses will be ineligible for a deduction due to the 10% threshold that must be met before deducting medical expenses. By setting up and contributing to a Health Savings Account you can deduct your full contribution to the account and have the flexibility to pay your medical bills with tax-free withdrawals from the account.