If you’re thinking about switching to a high-deductible medical insurance plan, be sure to take advantage of the tax benefits available through a Health Savings Account (HSA). While the upfront deductible can seem daunting at first, having an HSA can help to balance out your expenses by allowing you to set money aside, tax-free, to cover many medical costs.
Any contribution made to a qualifying HSA is 100% tax deductible. Plus, interest earned on the account is tax-free. Once the HSA is set up, you can start using the funds right away to help pay for allowable medical expenses, such as doctor visits, prescriptions, and even dental and vision care. After your high deductible is met and your insurance coverage begins, you can continue to add to or withdraw from your HSA as necessary, putting the money toward qualified medical expenses for yourself, your spouse, or your dependents.
Under current tax law, anyone covered by a high-deductible plan (with no supplemental insurance plan) is considered an eligible individual for HSA purposes. As long as you’re not eligible for Medicare benefits or claimed as a dependent on another taxpayer’s return, you’re likely to fit the criteria for contributing to an HSA.
How much money you can deposit into your HSA depends on the allowable annual limit of your account. Contribution amounts are determined on a monthly basis, so each month that you qualify, you can add funds up to one-twelfth the total limit for the year.
Best of all, the dollars you put into an HSA are never lost. Any remaining HSA money is rolled over at the end of the year to be used for future medical bills.
When you have questions about Health Savings Accounts and the tax breaks they offer, turn to the pros at Taxation Solutions, Inc. We’re Cincinnati’s source for trusted tax advice.