Should you take advantage of an HSA? Many people sign up for a high deductible healthcare plan (HDHP) either at work on the exchange but don’t realize that these healthcare plans work best when paired with a healthcare savings account (HSA). An HSA is triple tax-preferred. What the heck does that mean?
It means you can save on taxes three ways:
- You can take a deduction against your income on your taxes or make pre-tax contributions through your payroll provider.
- Money contributed to an HSA grows tax-free while inside the HSA.
- Money withdrawn for qualified medical expenses (as defined by the IRS) is tax-free.
Want to know more about the mechanics of an HSA? I wrote an article for Richmond Family Magazine that explains HSAs.
More and more employers are offering health savings accounts (HSAs) as part of their employee benefits package. This savings account allows you to set aside money to pay for qualified medical expenses incurred during the year income tax-free. The Upside…
Important side note: Not all High Deductible Healthcare Plans qualify for HSA accounts. Some plans, including plans I saw being sold on the Healthcare Exchanges actually don’t meet the requirements set for by the IRS. For example, their deductible is too high (or too low) at either the single or family level. Or the out-of-pocket maximum is too high. Ask your insurance agent, financial planner, or CPA whether or not your plan qualifies.
For even MORE information about HSAs and Flexible spending accounts read “Can an HSA or FSA Save You Money?“