You may have heard of a Health Savings Account (HSA) and wonder how they really work. Let’s make it simple. Thankfully, we’ve compiled the basics for you.
For individuals and families
A health savings account is a specific type of savings account offered by banks, credit unions and insurance companies. The account is created specifically for you by the bank or other investment company – all you have to do is ask. Our team can help you get an HSA in place. Many individuals and business owners choose to create a health savings account because of the significant tax savings. How? Medical expenses paid out of the account are tax deductible. Another benefit is that any person can contribute to your HSA, especially a family member.
There are limits on how much you can put into your health savings account and this can change from year to year. In 2015, you could save up to $3,350 if you were an individual, and a family could save up to $6,650. Those 55 and older qualify to save $1,000 more each year. Essentially, if you go to the doctor and your health insurance has a deductible, use HSA funds to pay it.
The money you save in your HSA can be used to pay health insurance deductibles, but can also be used to pay for other types of care not covered by your health insurance, including dental and vision care. It should be understood that if you use your HSA for expenses other than the qualified expenses, you will be taxed, and people under 65 will also pay a penalty for withdrawing money for another purpose. If you are over 65, you will only pay your normal tax rate and will not face these penalties.
Health savings plans for companies
Business owners can also set up an HSA, and many choose this strategy to save money and as a valuable benefit to their employees. The company can make various arrangements and have the payment to the HSA taken from an employee’s paycheck, which can also be done for a 401(k). The contribution is before tax when it is made through salary deductions and the employer has the option of paying a certain percentage on behalf of the employee. It is important to know that companies have different rules when it comes to setting up a health savings account, with each company differing slightly depending on the type of company.
The money withdrawn from a health savings account to pay for medical expenses is not taxed – another big advantage. There are payroll tax deductions and the interest and investment income your business earns is also not subject to taxation, and an entrepreneur can save money in several different ways once the account is established.
Talk to one of our friendly team members about setting up a Health Savings Account – it can save you money and isn’t complicated. We are local, so we can be easily reached when you need help or have questions. If you already have health insurance for your family, yourself or your business, we’re happy to show you the savings you can achieve by setting up an HSA, and we can review your current insurance to help you see if this type of account can save money. It’s the best way to pay your health care costs, and we know exactly what to do. Call us today!