Health Savings Accounts: A Tax Savings Advantage for You!

Take Advantage of a Tax Advantage!

With the new ObamaCare taking effect, many Americans will be in need of a way to offset the high cost of the high deductible health plans now available.  Many Americans insurance policies are being cancelled and are being forced into the ObamaCare system, while others now have insurance available to them that was unattainable before.  Those with lower income will qualify for healthcare coverage at little or no cost.

However, those with higher incomes outside of the income limitations set in the ObamaCare Plan, will have to pay higher premiums and medical expenses under insurance plans offered.  The lower the premium, the higher the deductible and shared cost of actual medical expenses.  I have done some research and compared various medical plans to include monthly premiums, deductibles, out-of-pocket expenses, co-pays, and co-insurance payment requirements.  A minimal, low-cost insurance plan costs about $450-650 month for one person.  But, the deductibles  ($3,500-6,000), out-of-pocket maximum ($3,500-7,000), co-pays ($40-100), and co-insurance payments(30-50%) are very high.  A consumer may also choose a a plan with lower deductibles and co-pays, but the monthly insurance premium is much higher.

If yo are employed and have health plans available as a benefit, many employers are only offering employees high-deductible plans due to the enormous cost of the medical plans.

So, the question remains, how can you afford these increased costs of medical coverage?

Health Savings Accounts

Health Savings Accounts (HSAs) are self-directed, self-funded plans that help a consumer save money to pay for medical expenses on a tax-free basis.  In effect, the HSA will reduce your taxable income up to a maximum amount, so you may pay for your medical expenses with your savings plan.

Benefits

HSAs have many benefits, including:

• Participants can claim a tax deduction on their tax return, even if there are no itemized deductions (it is a reduction of overall income)
• Contributions made by an employer on behalf of the employee are still not taxable
• Contributions can be rolled over year to year until expenses are paid
• Interest and other earnings are tax free
• Distributions are tax free if paid for qualified medical expenses
• IRA rollovers to an HSA are permitted, under certain conditions

Eligibility

Consumers will have to meet the following requirements to be eligible for an HSA:

• Have a qualified high-deductible insurance plan in place
• Not be covered by any other insurance
• Not covered by Medicare
• Not be claimed as a dependent on anyone else's tax return

How Much

A consumer can contribute a set amount annually to an HSA:

• 2013:  $3,250 individual/$6,450 family
• 2014:  $3,300 individual/$6,550 family
• Over 55 years of age:  $1,000 catch up amount allowed
• Savings can be rolled over until after retirement to pay for medical expenses (however, contributions cannot continue after age 65)

Where to Open

A consumer can open an HSA at local banks and investment companies.  Also check with your employer to see if they provide a similar plan that you can take advantage of.  Research to compare the annual fees set by the bank or investment company.  According to my research, the average annual fee is $25.  Many of the accounts are not FDIC insured, as they are an "investment" account, so savings are not necessarily guaranteed.

HSAs are an excellent way to build up a savings account for current or future medical care costs. It provides valuable tax savings benefits from year to year.  It is definitely an investment in your future and your health!

If you have any questions, please e-mail me at tinataxpro@softcom.net or call me at (209) 329-1255.