How to stay healthy, wealthy and wise using a Health Savings Account (HSA).
By Peter D. Recchia, CPA, AIF
June 18, 2015
The Health Savings Account (HSA) was created in 2003 to allow those enrolled in high-deductible health plans to receive tax-preferred treatment of money they saved for or would spend on medical expenses. This type of account allows more of your money to be sheltered from income taxes, allowing you some tax free savings.
It’s great for your medical expenses because it helps offset the cost of high deductible health care plans. With health insurance deductibles continually on the rise and reaching into our pocketbooks, you might be pleasantly surprised that your health plan may meet the deductible requirements as defined by the government at hsacenter.com. Here are three ways enrolling in an HSA contributes to your tax planning:
- Contributions to an HSA are tax deductible
- Earnings on the funds within the HSA are not taxed
- Distributions from the HSA to cover qualified medical expenses are not taxed
More recently, the HSA is being viewed as tool for retirement. If you maxed out your IRA or 401(k) contributions, adding an HSA to your retirement savings bucket can help supplement retirement income. You can continue to use your HSA for qualified medical expenses tax free or if funds are taken for other reasons, they will be treated and taxed just like an IRA. An added benefit begins once the retirement age of 65 has been reached: your HSA funds can be used to pay premiums for Medicare A or B, Medicare HMO and supplemental health insurance.
Which is the best way to use an HSA for your circumstances? Here are more valuable HSA details at about.com. Let's talk about putting money back in your pocket with an HSA.
Email Peter if you need HSA guidance.
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