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August 21, 2009
Health Savings Accounts Provide Tax-Free Health Care Savings Now
Many Americans are feeling the pinch these days from ever-increasing health care costs, and a comprehensive solution to this problem still needs to be found. That being said, a Health Savings Account can ease the burden of high deductibles in the here-and-now. Anyone under the age of 65 who purchases an eligible high-deductible health insurance plan - either through an employer or on their own - can set up a Health Savings Account, which supplements high-deductible health insurance policy coverage through the use of tax-free, user-contributed savings.
For the 2009 tax year, a policy qualifies as high deductible health insurance plan if it meets both of the following conditions:
* The policy’s annual deductible is at least $1,150 for an individual or $2,300 for a family.
* Yearly out-of-pocket health care expenses do not exceed $5,800 (individual) or $11,600 (family).
Eligible policyholders can add funds to their Health Savings Account by contributing up to $3,000 per year in pre-tax income (up to $4,000 per year if you’re 55 or older). Health Savings Account users also earn tax-free interest on their contributions, and fee-free withdrawals can be made at any time for health care expenses. Employers can contribute funds to Health Savings Accounts as well, and unlike a flexible spending account there is no “use by” deadline tied to a Health Savings Account.
Even though there are substantial tax and savings benefits to a Health Savings Account, it also contains drawbacks in the form of limited usage and contribution amounts. Users who withdraw Health Savings Account funds for any purpose other than health care are hit with heavy penalty fees, and the yearly maximum for contribution amounts is relatively small compared to the astronomical cost of a major medical procedure not covered by insurance. Despite these limitations, however, Health Savings Accounts provide eligible policyholders with a long-term, cost-effective way to offset out-of-pocket health care costs.
Get more Health Savings Account information at HSA for America.
Posted by Wiley Long at August 21, 2009 01:20 AM