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April 01, 2010
What Are the Tax Advantages of Health Savings Accounts?
A Health Savings Account (HSA) allows you to avoid federal income tax by saving up to $3,050 for singles, or $6,150 for families, in tax-deductible contributions to your HSA. There is no minimum deposit (it can be $0), but any deposit you make into your HSA by April 15th is considered an "above the line" tax deduction for the previous year's income taxes. This means that you get a federal income tax deduction for money you put in even if you take the standard deduction, and don’t itemize.
This tax deduction is available to everyone because there are no limitations on the amount or source of income. Plus, a one-time rollover from your Flexible Spending Account, Health Reimbursement Arrangement, or IRA is allowed.
If your employer makes a HSA contribution for you, it is “excluded” from income. That means it’s NOT subject to any income tax or FICA. In all but four states (Alabama, California, New Jersey and Wisconsin), contributions to a HSA are NOT counted as income so you can also take a state income tax deduction for your HSA contributions.
Learn how to choose the right High-Deductible Health Insurance plan with our online Health Savings Account “How To” Guide. It explains exactly how to view your quotes, compare features, and check the physician network so you get the plan that is best for your situation. Then, just click “Apply” to complete the process online in minutes.
Our HSA Info page also provides clear, detailed information on exactly how HSA plans work, how to calculate your tax savings, and how to withdraw money from your HSA tax-free. You may also call us at 866-749-2039, and our expert advisors will answer your questions at no charge.
Posted by Wiley Long at April 1, 2010 01:26 AM