We are heading down the final
stretch of 2012 and for many that means that it is time to review their benefits
including medical, 401k and other fringe benefits. One of those areas that are offered is the
health savings account and it is seldom used, but offers many benefits.
In an era of temporary tax
provisions, health savings accounts (HSAs) have been around a long time, and
little has changed since they were first introduced in 2003. More importantly,
HSAs offer tax benefits, many of which stay in place under the new health care
Here's a refresher on how
HSA has two parts, a high-deductible health insurance policy and a savings
account. The idea is simple: You buy a health plan with a high deductible,
and you deposit cash into a savings or investment account to pay the
policy deductible and other qualified out-of-pocket medical expenses.
tax benefit comes from the way the savings account part of the HSA works,
which is similar to a traditional individual retirement account. For
example, you can claim a federal income tax deduction for contributions to
your HSA, and the deduction is above the line, meaning you can benefit
without having to itemize.
2012, the maximum tax-deductible contribution is $3,100 when the insurance
plan covers only you, or $6,250 when you purchase an insurance plan for
your family. When you're age 55 or older, you can contribute, and deduct,
an extra $1,000.
addition, interest, dividends, or other growth in the account is tax-free
as long as you use withdrawals for qualified medical expenses. What
happens if you use the money for other purposes? The withdrawals are
included in income, taxed at your regular rate, and subject to a 20%
rules apply, including the opportunity to fund an HSA with a tax-free
rollover from your individual retirement account.
Please stop by your local Liberty Tax office so we can help you determine how a HSA will benefit you.
Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.