Health Savings Accounts (HSA) was all the rage several years ago but they seem to be lessening in popularity. The truth is, HSAs are an excellent tax sheltered account that can be combined with high-deductible healthcare insurance plans to save you money. In addition, by having an HSA, you are saving for any current or future healthcare costs that may arise.
Your employer may offer Health Savings Accounts or you can shop for one on your own. Typically, they work much like a 401(k) where your contribution is taken out of your paycheck, prior to taxes being taken out. If you are an independent contractor, small business owner or your current employer doesn’t offer HSAs, you are still eligible to receive the tax deduction, it just has to be filed appropriately on your federal income tax form.
The amount you contribute each year is tax deductible, up to certain limits. For single individuals, the annual deductible is tapped at $3,300 annually and $6,550 annually for married couples. These amounts increase by $1,000 when you reach the age of 55. What most people don’t know is that anyone can contribute to your Health Savings Account – spouse, friends, parents, siblings…anyone can help you to build a healthcare safety net.
In order to be eligible to receive tax deductions for your HSA, you must be enrolled in a “High Deductible Health Plan” with a minimum annual deductible of $1,250 for individuals or $2,500 for families. Your annual deductible can be paid from your HSA, or you can save the money in your account to pay for additional healthcare expenses as they arise.
Benefit: The Investment Rolls over and Continues to Earn Interest
At the end of the year, if you have not tapped into your HSA, the amount in your account stays invested and continues to grow. While you can withdraw from the account for non-medical costs, this is not recommended. The amount will be taxed, and you could be subject to a 10% penalty. It is advised that you keep the account moving forward with greater contributions to pay for any future medical costs.
Benefit: No Taxes are
paid on the Money in your
Account
As mentioned above, contributions to your HSAs are tax deductible, providing for an excellent return on your investment that is worth repeating.
Benefit: Control of your Medical Expenses
A Health Savings Account allows you to direct how the money for your healthcare is spent. You can elect to use the money for your insurance deductible or for other out-of-pocket medical expenses as they arise. As mentioned above, you can also continue to build up the amounts in your account for future healthcare costs.
If you are interested in starting a Health Savings Account for you or someone you know, and want to learn more about the tax benefits available to you, contact Barry Bandler Accounting & Tax Services today. Through exceptional personal service, Barry offers tax services, financial planning services and accounting services for individuals and businesses. Learn more about what an HSA can do for your financial health.
