If the sick season has you getting to know the drugstore pharmacy staff a little too well, it might be time to look at a Health Savings Account. Maggi Tax answers the most frequently asked questions about this versatile fund that serves as a great way to save money for out-of-pocket medical expenses.
What is a Health Savings Account?
This fund gives account holders the flexibility to pay current medical expenses or save for future ones by using a tax-advantaged checking account. While the account is individually owned, other people may be elected as authorized signers. This status gives them permission to withdraw funds and use an assigned debit card.
Am I eligible for a Health Savings Account?
Most likely. If you are covered only by a High Deductible Health Plan (HDHP), are not enrolled in Medicare benefits, and are not claimed as a dependent on another tax return, you qualify for this type of account.
What kind of benefits does an HSA offer?
Many! First off, flexibility. As the owner of this account, you determine how the funds are spent. Save money for future expenses or use them for current medical needs. Unused funds roll over so there is no “use it or lose it” rule. Another HSA perk? Contributions made to this account are tax-free, the earnings are tax-free, and funds withdrawn for eligible medical expenses are tax-free. Nearing retirement? Because you are the account owner, not your employer, you are entitled to take all your acquired HSA funds upon your leave.
How do I contribute to my HSA?
The three most common ways to contribute to an HSA are through payroll withholding, by an employer that is excluded from your income or taxes, and through an after-tax contribution made directly to the account when filing your taxes. The IRS mandates a maximum contribution amount that changes annually. Check with a tax professional to ensure you are within the parameters.
Would you like to learn more about opening a Health Savings Account? We’re here to help! For over 30 years, Maggi Tax has guided Tampa Bay residents with all aspects of their financial well-being. Contact us here or call (727) 799-1701 to schedule your appointment today.