Health Savings Accounts have been around for nearly 20 years, and now that they’re being touted as a big part of the Trump administration’s health care reform, you might be wondering what these accounts are and how they work. Here are some basic characteristics to help you learn the facts.
Story Highlights HSA provides tax benefit as well as insurance coverage.
Lower, more predictable premiums
Supports you financially in case of medical emergency
Contains money that you can use to pay for routine expenses
You can contribute up to $3,450 for this year or $6,900 per couple.
Contributions to an HSA do not count against your federal income tax; they instead go into a tax-advantaged account. The money in your HSA grows tax-free and may be withdrawn tax-free in the event of an emergency. (The rules on using the money to pay for major medical expenses vary, so check with your HSA administrator.)
Unlimited contributions are available for HSAs, but only one account per household is permitted.
Keep a Plan for High Medical Costs
Remember that I mentioned that some contributions to your HSA may be considered to be tax-deductible and tax-free in the event of an emergency? Well, most of the money in your HSA is not in play in that event. But if you or your spouse or dependent is sick and likely to encounter medical expenses in the next few years, you should have a family medical account. Not only can an HSA provide some added financial stability in the event of an emergency, it will serve to help you and your family prepare for severe medical expenses and prepare for unexpected expenses like car repairs or moving.
For more information about how to save for your family’s medical costs, including the costs you should expect to incur in the next five years, read on to learn more about how to set up an HSA.
The Tax Benefits of Health Savings Accounts:
Traditional HSA: Up to $3,450 for this year or $6,900 per couple
Health Savings Account: Up to $3,450 for this year or $6,900 per couple
The Account Minimums:
Traditional HSA:$3,450 for this year or $6,900 per couple
Health Savings Account: $3,450 for this year or $6,900 per couple
You may have more money in this category than you expected if you made more than the maximum amount in either Traditional or Health Savings Accounts. Contributions will be deducted from your adjusted gross income. I’ll leave it up to you to determine the right dollar amount for your exact situation.
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