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Don't
Delay Starting Your Health Savings Account
By
Kimberly Lankford
Ask Kim
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I'm
very interested in opening up a health savings account and
plan on buying a high-deductible health insurance policy in
the next few months. How much money will I be able to
contribute into the health savings account?
It depends
on the size of your deductible, if the policy covers you or
your entire family, your age and, most importantly, how early
in the year you buy the health insurance policy. The
sooner you sign up, the more you can deduct.
In general,
you can contribute up to the amount of your health insurance
deductible or $5,450 for family plans ($2,700 for individuals),
whichever is less.
People
55 and older also an extra $700 catch-up contribution in 2006.
But you
can only make the full contribution if you had a high-deductible
health plan in place on January 1, 2005. You can't open
the HSA until you buy the HSA-eligible health insurance, and
your maximum contribution is reduced by 1/12 for every month
you wait. If you don't buy the health insurance until
July 1, for example, you'll only be allowed to contribute
half of the maximum -- limiting your contribution (and income
tax deduction) to $1,325 for individuals and $2,625 for family
plans.
To qualify
for an HSA, your health insurance coverage must carry a deductible
of at least $1,000 for individuals, $2,000 for families.
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