HSAs are IRA-like savings accounts for taxpayers covered by high deductible health insurance plans. If you meet the tax law requirements, you can make contributions to the plans. Withdrawals are tax-free for unreimbursed health costs; any unused amounts accumulate tax-free and can be used for future expenses and the best part…they can also be withdrawn as taxable penalty free payments at retirement.
Who Can Get An HSA and What is Covered?
To take advantage of an HSA you must first be covered by a High Deductible Health Plan (HDHP). You cannot be receiving coverage under another health insurance plan, be a dependent on someone else’s plan or be enrolled in Medicare. The HDHP premiums typically run about 50% lower than some traditional plans. An HSA works in conjunction with the HDHP.
The HSA money can be used to help pay for the health insurance deductible and “qualified medical expenses” not covered by the health insurance, including dental and vision expenses. HSA accounts earn tax-free interest. By using your local bank and a debit card for your “qualified medical expenses” you will have an electronic record of all deposits and expenses to keep with your income tax records.
For 2016, the federal laws limits tax deductible HSA annual contributions to $3,350 for singles and $6,750 for families. The out-of-pocket expense limits for HDHP’s are $6,550 for singles and $13,100 for families.
Most medical, dental and vision expenses will be reimbursed under your HSA with some exceptions. A list of reimbursable expenses is available on the IRS website, www.irs.gov.
HSAs For the Self-Employed: If You Are In Charge…Take Charge!
The benefits of an HSA:
- Reduce your monthly premiums
- Grow your account until retirement like an IRA account
- There are NO network restrictions – choose your own doctors and hospitals
- Pay your medical expenses with pre-tax dollars
If you already have medical savings accounts (MSAs) you can roll the amounts over into a new HSA. Your contributions are deductible. We are not CPAs and do not offer tax advise, we do recommend that you consult with your accountant or ask us for a referral.
We have HSA Comparison Tables for single and family plans for your reference when we consult with you.