Did you know...that the new Health Savings Account program offers tax advantages? What is a Health Savings Account (HSA) and how can it save you money?
HSA’s combine a favored savings account with a High Deductible Health Insurance Plan.
The high deductible insurance plan protects you from the devastating financial consequences of catastrophic illness while making you responsible for “first dollar” costs
The attractive HSA component allows you to fund your out of pocket costs tax-free and accrue savings on a tax free basis to fund future medical expenses. These policies can save you 20% to 40% compared to traditional policies.
HSA’s offer the following tax advantages:
Tax-Deductible contributions to the HSA are tax deductible – just like an IRA
Tax-Deferred- Interest earnings accumulate tax-deferred.
Tax-Favored- distributions from an HSA for qualified medical expenses are tax-free.
You must be covered under a High Deductible Health Plan that meets the government guidelines for a Health Savings Account.
The amount you contribute to your HSA is up to you. You can contribute up to $2800 for an individual policy and up to $5650 for family coverage to your tax deductible HSA account in 2007. The amount you can save is adjusted each year based on inflation.
Self Employed participants deduct both the health premium and their HSA savings.
If you are not Self employed you still get to deduct 100% of your HSA savings even if you do not itemize your taxes.
Your HSA funds can be withdrawn without penalty at any time to pay for approved medical expenses. You can use the funds to pay for bills up to your deductible and for items not covered under your health plan. (Eye glasses, prescriptions, hearing aids, the list is extensive.) The money in your account will continue to grow tax deferred until you are eligible for Medicare. If you withdraw your money for non medical reasons, you will have a 10% penalty and pay tax on your withdrawal. When you are eligible for Medicare you can no longer contribute to your HSA account. You can withdraw your funds without penalty for non medical expenses once you are over 65 eligible for Medicare. You can also leave the funds in your account to pay for medical expenses not covered by Medicare after you turn 65. You pay ordinary tax when you withdraw funds for non medical expenses after you are on Medicare.
Please call me and I will go over this program with you in detail.
David Randolph
