We have received many questions from clients regarding Health Savings Accounts and we thought it would be helpful to provide an overview. Health Savings Accounts are part of the movement toward “consumer-driven healthcare”, which is an approach aimed at encouraging patients to make better informed choices about the costs associated with their health care.
An HSA is a personal tax advantaged medical savings account set up to pay qualified medical expenses on a tax-free basis. To be eligible and qualify for an HSA, an individual must be enrolled in a qualified high deductible health plan (HDHP). An HDHP is defined as a plan with a deductible of $1300 or more for an individual and $2600 or more for two or more coverage.
Generally, an adult who is covered by a high-deductible health plan (and has no other first-dollar coverage) may establish an HSA. During 2016, HSA’s allow for tax deductible contribution of up to $3,350 for a self-only plan and $6,750 for coverage of two or more. Additionally, any 55 year old or older subscriber is eligible for a $1,000 catch-up deduction.
The advantages of HSA accounts include:
- Exempt from payroll taxes
- Deductible contributions include both earned and unearned income
- Choice of investment types and risks
- Funds can be used at any time/any age for qualified medical expenses
- Can continue to make deductible contributions after employment
- The account owner is able to spend it on eligible health care expenses, invest it, or spend it on consumer goods (although penalties, such as taxes, apply)
If you have any further questions on this, feel free to give us a call.
The information and materials herein are provided for topical general reference purposes only and are not intended to constitute legal, tax or other advice. Opinions on any specific matters and are not intended to replace the advice of a qualified attorney, tax consultant or plan provider. Federal and state laws change frequently and, as such, there is no guarantee as to the accuracy or completeness of the information featured herein. In accordance with IRS Circular 230, this communication is not intended or written to be used, and cannot be used as or considered a ‘covered opinion’ or other written tax advice and should not be relied upon for any purpose other than its intended purpose.
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