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October 24, 2011
Health Savings Accounts Mean Lower Taxes
In tough times, people need to be innovative to reduce what they spend on health care without giving up access to medical services. One way that people can gain more control over what they pay for health care and for taxes is called the Health Savings Account (HSA) Plan.
HSA Plans give tax deductions for money deposited in an HSA. That money accrues interest as long as it remains in the account, which can be until you want to use it for retirement. All the while it is growing with tax-free earnings, you can deduct annual contributions to lower your taxes.
Contributions made to your Health Savings Account before the April tax deadline becomes an "above the line" deduction for the previous year's tax return. Since that money is not counted as income, it’s not subject to income tax or FICA tax.
To make an HSA work, you need a high-deductible health plan that allows you to start an HSA. Not all do, so look for HSA-qualified plans. Once you have the insurance in place, you can open an HSA and you're under no requirement to fund it beyond the opening deposit. That means you can either fund it to the max, lower your taxes and deposit what you save on premiums and taxes. Or, you can wait until you have medical expenses to cover, deposit just enough to cover that and make an immediate withdrawal. You can even reimburse yourself at a later date.
You can learn how much you can deduct from your taxable income for individual and family plans, as well as see what types of HSA Plans are available here with us. Small business owners can also use these plans to cover employees for reduced premiums.
Posted by Wiley Long at October 24, 2011 08:44 AM