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Benefits of a Health Savings Account
June 30, 2020 at 5:00 AM
by Elliot Omanson
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Are you aware of the benefits of a Health Savings Account (HSA). The HSA came out of the Affordable Health Care Act and is one of the most powerful pieces of a health care strategy.

Overview

A health savings account (HSA) is a tax-favored savings account created for the purpose of paying medical expenses. Patients must have a high-deductible health insurance plan in order to quality for an HSA. The savings account can be used to then cover the out-of-pocket costs. Contributions to HSA’s generally are not subject to federal income tax, and the earnings in the account grow tax-free. Unspent money at the end of the year can stay in the account. It earns interest and is available for future health expenses.

HSA Tax Benefits

Here are the multiple tax-advantages that a health saving account gives you as a way to save for medical costs.

· Contributions into the account are tax-deductible, or if made through a payroll deduction, reduce your taxable income by the amount contributed

· Account earnings are tax-free

· Withdrawals made for qualified medical costs are not taxed

Other Thoughts

High-deductible health plans, which are a requirement for HSAs, aren't always the best option for patients, especially those who expect to have significant healthcare expenses in the future. Those patients may be better off with an insurance plan that charges higher premiums upfront but covers a greater percentage of their costs.

After patients enroll in Medicare, they can no longer contribute to an HSA.

Unused money in your HSA in not forfeited at the end of the year. It continues to grow tax deferred.

Summary

There are many benefits to this powerful health care strategy, including several tax advantages. OWLFI can help you with your health care needs as we look at your retirement goals.

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