Instructions for Form 8889 |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
Use Form 8889 to:
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Report health savings account (HSA) contributions (including those made on your behalf and employer contributions),
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Figure your HSA deduction, and
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Report distributions from HSAs.
Additional information.
See Pub. 969, Health Savings Accounts and Other Tax-Favored Health Plans, for more details on HSAs.
You must file Form 8889 if any of the following applies.
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You (or someone on your behalf, including your employer) made contributions for 2006 to your HSA.
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You received HSA distributions in 2006.
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You acquired an interest in an HSA because of the death of the account beneficiary. See Death of Account Beneficiary on page
2.
To be eligible to have contributions made to your HSA, you must be covered under a high deductible health plan (HDHP) and
have no other health
coverage except permitted coverage. If you are an eligible individual, anyone can contribute to your HSA. However, you cannot
be enrolled in Medicare
or be claimed as a dependent on another person's tax return. You must be an eligible individual on the first day of a month
to take an HSA deduction
for that month.
The account beneficiary is the individual on whose behalf the HSA was established.
Generally, an HSA is a health savings account set up exclusively for paying the qualified medical expenses of the account
beneficiary or the
account beneficiary's spouse or dependents.
Distributions From an HSA
Distributions from an HSA used exclusively to pay qualified medical expenses of the account beneficiary, spouse, or dependents
are excludable from
gross income. (See the line 13 instructions for information on medical expenses of dependents not claimed on your return.)
You can receive
distributions from an HSA even if you are not currently eligible to have contributions made to the HSA. However, any part
of a distribution not used
to pay qualified medical expenses is includible in gross income and is subject to an additional 10% tax unless an exception
applies.
Qualified Medical Expenses
Generally, qualified medical expenses for HSA purposes are unreimbursed medical expenses that could otherwise be deducted
on Schedule A (Form
1040). See the Instructions for Schedule A and Pub. 502, Medical and Dental Expenses (Including the Health Coverage Tax Credit).
However, you cannot
treat insurance premiums as qualified medical expenses unless the premiums are for:
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Long-term care (LTC) insurance,
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Health care continuation coverage (such as coverage under COBRA),
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Health care coverage while receiving unemployment compensation under federal or state law, or
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Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such
as Medigap).
High Deductible Health Plan
An HDHP is a health plan that meets the following requirements.
* This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers.
Instead, only
deductibles and out-of-pocket expenses (such as copayments and other amounts, but not premiums) for services within the network
should be used to
figure whether the limit is reached.
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An HDHP can provide preventive care and certain other benefits with no deductible or a deductible below the minimum annual
deductible. For more
details, see Pub. 969. An HDHP does not include a plan if substantially all of the coverage is for accidents, disability,
dental care, vision care, or
long-term care. An HDHP also cannot be insurance that you are permitted to have in addition to an HDHP. See Other Health Coverage next.
If you have an HSA, you (and your spouse, if you have family coverage) generally cannot have any health coverage other than
an HDHP. But your
spouse can have health coverage other than an HDHP if you are not covered by that plan. If you have a health flexible spending
arrangement or health
reimbursement arrangement, see Pub. 969.
Exceptions.
You can have additional insurance that provides benefits only for:
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Liabilities under workers' compensation laws, tort liabilities, or liabilities arising from the ownership or use of property,
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A specific disease or illness, or
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A fixed amount per day (or other period) of hospitalization.
You can also have coverage (either through insurance or otherwise) for accidents, disability, dental care, vision
care, or long-term care.
For information on prescription drug plans, see Pub. 969.
An individual generally is considered disabled if he or she is unable to engage in any substantial gainful activity due to
a physical or mental
impairment which can be expected to result in death or to continue indefinitely.
Death of Account Beneficiary
If the account beneficiary's surviving spouse is the designated beneficiary, the HSA is treated as if the surviving spouse
were the account
beneficiary. The surviving spouse completes Form 8889 as though the HSA belonged to him or her.
If the designated beneficiary is not the account beneficiary's surviving spouse, or there is no designated beneficiary, the
account ceases to be
an HSA as of the date of death. The beneficiary completes Form 8889 as follows.
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Enter “Death of HSA account beneficiary” across the top of Form 8889.
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Enter the name(s) shown on your tax return and your SSN in the spaces provided at the top of the form and skip Part I.
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On line 12a, enter the fair market value of the HSA as of the date of death.
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On line 13, for a beneficiary other than the estate, enter qualified medical expenses incurred by the account beneficiary
before the date of
death that you paid within 1 year after the date of death.
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Complete the rest of Part II.
If the account beneficiary's estate is the beneficiary, the value of the HSA as of the date of death is included on the account
beneficiary's final
income tax return. Complete Form 8889 as described above, except you should complete Part I, if applicable.
The distribution is not subject to the additional 10% tax. Report any earnings on the account after the date of death as income
on your tax return.
Deemed Distributions From HSAs
The following situations result in deemed distributions from your HSA.
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You engaged in any transaction prohibited by section 4975 with respect to any of your HSAs, at any time in 2006. Your account
ceases to be
an HSA as of January 1, 2006, and you must include the fair market value of all assets in the account as of January 1, 2006,
on line 12a.
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You used any portion of any of your HSAs as security for a loan at any time in 2006. You must include the fair market value
of the assets
used as security for the loan as income on line 21 of Form 1040 or Form 1040NR.
Any deemed distribution will not be treated as used to pay qualified medical expenses. Generally, these distributions are
subject to the additional
10% tax.
A rollover is a tax-free distribution (withdrawal) of assets from one HSA or Archer MSA that is reinvested in another HSA.
Generally, you must
complete the rollover within 60 days after you received the distribution. You can make only one rollover contribution to an
HSA during a 1-year
period. See Pub. 590, Individual Retirement Arrangements (IRAs), for more details and additional requirements regarding rollovers.
Note.
If you instruct the trustee of your HSA to transfer funds directly to the trustee of another HSA, the transfer is not considered
a rollover.
There is no limit on the number of these transfers. Do not include the amount transferred in income, deduct it as a contribution,
or include it as a
distribution on line 12a.
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