Is a Health Savings Account exempt on the FAFSA or is it lumped in with your cash, savings and checking $?
http://ifap.ed.gov/fsahandbook/attachments/1213AVGCh2.pdf
pg. 19:
Health savings accounts
Health savings accounts (HSAs) resemble tax-deferred pension and savings plans more than flexible spending arrangements; for example, the balance in an HSA persists from year to year, while that in a flexible spending arrangement must be spent on qualified expenses by the end of the year. Therefore, treat taxfree contributions to an HSA as untaxed income; these will appear on line 25 of the 2011 IRS Form 1040. The balance in the account does not count as an asset, nor would distributions from it count as untaxed income when they are used for qualified medical expenses. Distributions not used for qualified expenses are subject to income tax (and a possible penalty) and will be counted in the adjusted gross income.
So that’s a no right? I do realize I need to put it in the untaxed income catagory though so thanks ~ very helpful! This is a cool little info thing.
That’s a no as far as including the HSA balance with cash, savings and checking assets. My understanding is that only after-tax contributions to an HSA will show up on form 1040 line 25, where for tax purposes they will then be deducted for purposes of calculating AGI. Any before-tax contributions to your HSA, such as would be deducted from your pay by an employer as part of a cafeteria plan, are not reported on FAFSA.
It is an exempt asset that is treated like 401K, IRA accounts. Contributions made to it are also treated like contributions to those same qualified plans (have to add the tax exempt contributions from the previous year back to income). However, any withdrawals from HSAs used for allowable expenses under the plan are not added back to income when they are made.
I don’t think that this is entirely accurate. After-tax HSA contributions made by the employee/parent that are deductible for federal tax purposes on form 1040 line 25 are added back to income on FAFSA, just like payments to tax-deferred pension and retirement savings plans, but before-tax HSA contributions made through an employer cafeteria plan are not.
^No such things as “After-tax HSA contributions”
What I mean by that is an HSA contribution made with after-tax dollars that can then be deducted on form 1040 line 25, after completing form 8889.
Okay, wow ~ thanks for all the input! I feel like I should go back to school for accounting so I can fill out the FAFSA app.