Health Savings Accounts are rising in popularity as a method of paying for medical expenses with tax sheltered dollars. To be eligible for a health savings account (HSA) you:
How it Works
When a person enrolls in an HSA compatible health insurance plan they have the option of setting up a side-fund to pay for their medical expenses. Any monies that are contributed to their HSA fund are tax preferred, and they can withdraw these contributions tax-free to pay for qualified medical expenses. Any interest that is accrued through their HSA account is also tax-free.
Not only are HSA funds tax-preferred, but health insurance premiums are also tax-deductible when a person is enrolled in this type of HSA compatible plan. One of the advantages of these plans are the tax-benefits, but they also offer lower premiums when compared to other plans with comparable deductibles. With an HSA compatible plan you will still receive the same preventative care benefits that are required by the Affordable Healthcare Act. In addition, the funds in your HSA account belong to you and will accumulate if not used within the calendar year.
The maximum contributions for 2012 are $3,100 for an individual and $6,250 for a family, and for 2013 the limits are $3,250 for individuals and $6,450 for families. Please contact your tax advisor regarding the specifics of your personal contributions and tax benefits.