An HSA, or Health Savings Account, can be a welcome addition to almost anyone’s overall financial plan. Our healthcare system is changing by leaps and bounds these days. Navigating it can be overwhelming even if you’re young and healthy.
To be eligible to contribute to an HSA, first you must be enrolled in a high deductible health plan, or HDHP. Don’t let the words high deductible scare you off just yet. For 2014, a high deductible plan for a single person has a yearly deductible of $1,250 and for a family plan, $2,500. Secondly, you cannot be on Medicare or covered by any other health plan that is not an HDHP. Lastly, you cannot contribute if you can be claimed as a dependent on another person’s return. Your kids don’t qualify but it can still be a good deal for you.
How much can you contribute? In 2014, if you’re single, the amount is capped at $3,300 and $6,550 for a family. If you’re over age 55, add $1,000 to those amounts. Woohoo!!
Buckle your seat belts and hang on because there’s more! Contributions to an HSA are deductible regardless of the source of your income, and there are no income limits! Unlike an IRA contribution that requires you to have earned income, and phases out as your income rises, the HSA has no similar restriction.
Here’s what makes an HSA a sweetheart of a deal. If you qualify, open an HSA account and make the contribution. Take the tax deduction. Invest the money and watch it grow. Withdraw from your HSA at anytime tax free and without penalty to pay your out of pocket medical expenses.
You can find plenty of resources on the Internet to help you determine if an HSA is right for you. You may also want to ask at your local bank since many offer HSA’s to their customers. An HSA may be the answer to solving the mystery of healthcare while lowering your tax bill at the same time.
Linda C. Wright, Author
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Thanks to Linda C. Wright, CPA for her contribution to my blog.
For more tax tips and to sign up for my newsletter visit my website at R. Darren Sanford, CPA, CGMA.
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