Since health insurance deductibles have risen to such high levels, it makes more sense than ever to consider the Health Savings Account (HSA) as part of your financial plan. HSAs have some real advantages to other other tax favored healthcare savings plans. Here are some HSA basics.
HSA contributions made by the owner are tax deductible. Contributions are excluded from gross income. Distributions for qualified medical expenses are tax free. There are no time constraints on spending your HSA balance. In addition, Health Savings Accounts are portable.
Generally, medical expenses that you can deduct on your tax return are qualified for HSA purposes. Long-term care insurance premiums are qualified expenses. Also, other health care coverage like COBRA and some Medicare expenses also quality. Medicare supplement premiums are not a qualified expense.
Deductibles for high deductible plans must be at least $1,350 for individuals and $2,750 for family plans. Preventative care benefits with a lower deductible or no deductible will not disqualify the plan as a high deductible plan. Contribution limits are $3,500 for individuals and $7,000 for families. Also, if you are over 55, you can contribute and additional $1,000. Individuals enrolled in Medicare can not contribute to an HSA.
Finally, one source of confusion is whether participants in a group health plan can have an HSA. The answer is yes. While employers are not required to offer HSAs, if your plan is a high deductible plan, you can contribute to an HSA. Permission or authorization is not necessary to open an HSA. Any qualified HSA trustee like a bank or insurance company can open an account on your behalf.
Considering all this, maybe its time to give the Health Savings Account a try?
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual, nor is intended to be a substitute for specific individualized tax advice.