A Health Savings Account is a tax-favored savings account combined with a qualifying HSA insurance plan. By allowing you to deposit tax-deductible funds into a savings account that you can use to cover medical costs, Health Savings Accounts enable you to take control of your own health care decisions.
In order to qualify, you must have a high-deductible health insurance plan that can be partnered with an HSA. These plans are available through various insurance companies thoroughly the United States. HSA plans have minimum annual deductibles of $1,200 for individual coverage and $2,400 for family coverage. Annual out-of-pocket expenses (including deductibles and co-payments, but not premiums) are capped at $6,050 for individuals or $12,100 for families.
Once your insurance policy has become effective, you may fund your HSA account. There is no minimum deposit required. Deposits made by April 15 are considered “above the line” tax deductions for the previous year’s income. So you can take a federal income tax deduction for money you put into your account even if you take the standard tax deduction without itemizing. You can save up to $3,100 for singles or $6,250 for families by regularly depositing into your HSA account. This tax deduction is available to everyone, with no limitations on the amount or source of income.
Once your deductible is met, the health insurance covers your medical expenses as defined in the policy. Health Savings Accounts can help you save money on both your insurance premiums and your income taxes.
A particularly appealing aspect of Health Savings Accounts is that they encourage individuals to stay healthy. Any money from your HSA account that is not used to pay medical expenses is yours to keep. The money grows in the account free from federal tax. If you withdraw funds for approved medical expenses, it continues to be tax-free. If you withdraw money for non-medical expenses, you are required to pay taxes on the amount withdrawn.
For most Americans, out-of-pocket medical expenses are a relatively small expense each year. If you regularly fund your HSA and are fortunate enough to be healthy and not need much medical care, a substantial amount of wealth can build up in your account.
Health Savings Accounts are one of the best things to come out of Washington in a long time. They encourage several things that are positive for America’s future. They put market competition back in the healthcare arena. Health Savings Accounts encourage people to stay healthy. They let consumers choose how to spend their own health care dollars. Only by giving individuals the freedom to make their own choices can we as a society learn of the best solutions.
By allowing the use of HSA funds to pay for alternative, holistic, and preventive treatments, innovation and investment will be encouraged in areas where the current health care system has failed to find solutions. And people will be able to use the type of medicine that works for them. The end result should be a healthier population with access to a wide choice of treatment options.
If you’d like to learn more about an HSA, please call or email us today.
Long Financial Services