Health Savings Accounts!

Health Savings Accounts!

Health Savings Accounts (HSA’s) are one of the greatest gifts lurking in the tax code.   Not only are contributions to HSA’s tax deductible for all taxpayers, but the balance grows without being taxed, and withdrawals are tax free if used to pay for medical expenses.

Don’t confuse Health Savings Accounts with flexible spending accounts where you have to “use it or lose it.”  Dollars can be accumulated within an HSA without limit.  In fact, it may be the best course to pay for regular medical expenses out of pocket and allow the HSA account balance to grow.

To qualify for a Health Savings Accounts, you must:

  • Have an HSA-qualified health plan.hsa
    • Minimum required deductibles:
      • $1,250 for individual coverage in 2013 and 2014
      • $2,500 for family coverage in 2013 and 2014
    • Maximum out-of-pocket limits:
      • $6,250 for individual coverage in 2013—$6,300 in 2014
      • $12,500 for family coverage in 2013—$12,700 in 2014
  • Have no other health coverage except what is permitted as other health coverage
  • Not be enrolled in Medicare.
  • Not be claimed as a dependent on someone else’s tax return.

You will want to keep complete and accurate records of medical expenses to support the tax-free withdrawals from the HSA.  Medical expenses paid out of pocket can be reimbursed back to the date that the HSA was established.

Health Savings Accounts are offered by several banks and investment houses.  Many make available investment options in a wide range of investment securities for long-term investors.

Truly, there is nothing in the tax code that gives a tax deduction going in, grows tax free, and is tax free coming out.  A tax hat trick if you will!  Please contact us for more information and to answer your questions.