I use a health savings account. When can I deduct the medical expenses?

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Q. I use a health savings account (HSA) for medical expenses. This year I will use it all up and then some. At what point can I deduct the medical expenses?
— Sick of taxes

A. Health Savings Accounts (HSAs) give you an opportunity to set aside money before it’s taxed.

It’s a great savings if you have one available.

If you use up your HSA, then any medical expense would be accumulated above the HSA — expenses you are paying out of pocket — and if the expenses are over 7.5% of your adjusted gross income, then you can take a deduction for the excess as an itemized deduction on your tax return, assuming you can itemize, said Kenneth Bagner, a certified public accountant with Sobel and Co. in Livingston.

In New Jersey, medical expenses that exceed 2% of your income can be deducted, he said.

For federal purposes, adjusted gross income (AGI) is defined as gross income minus adjustments to income, Bagner said. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. Adjustments to income include such items as educator expenses, student loan interest, alimony payments or contributions to a retirement account, he said.

“For 2022 you need to have itemized deductions of at least $12,950 single or $25,900 married filing jointly in order to be able to itemize on your personal tax return,” he said. “Remember state and local tax deductions are limited to $10,000 a year, which includes real estate taxes, so you need other deductions such as medical over 7.5%, mortgage interest and charitable contributions in order to itemize.”

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This story was originally published on Oct. 7, 2022.

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