Take Advantage of HSA Contributions
Medical expenses are a huge portion of the deductions from our paychecks. Currently, my medical insurance cost is higher than it’s ever been, which says a lot because I’ve lived in big cities and worked for very small companies. Talk about high rates there. Nothing has yet compared, for me, to Indiana in 2019 at a medium-sized company.
If you are offered the opportunity to contribute to a Health Savings Account (HSA), do it. The money you provide to the account is removed from your paycheck tax-free. This means, essentially, that you are not being taxed twice for your medication and/or pharmacy needs. You will pay taxes on your purchase at the store(s) of your choice, but you will not pay taxes as it goes into your account.
Check out some of the facts and benefits of HSA’s below.
- There are hundreds of IRS-approved health expenses and some health insurance deductibles and co-insurance are covered for HSA use. For example, non-cosmetic dental treatments, crutches, hearing aids, laser eye surgery, contact lenses, eyeglasses, and physical therapy are all covered.
- Unlike many other employer-sponsored savings plans, an HSA allows you to roll over any money that you do not spend by the end of the year. This means that you can continue to accumulate savings in your account until you need it, for health care expenses.
- You can make tax-deductible contributions into a Health Savings Account that can earn interest.
- You can hold the money in your HSA in cash but you may have the opportunity to invest it in mutual funds or other securities. That can allow you to grow your savings faster and the earnings are not considered as taxable income.
- Withdrawals from an HSA can be made on a tax-free basis as long as they are used to pay for qualified medical expenses. Withdrawals are taxable income if they are used for non-medical qualified purposes.
- For individuals age 55 and older who are not yet eligible for Medicare, additional catch-up contributions are allowed.
- The annual contribution limits for HSA contributions may change, but as of 2018, the limits were $3,450 for an individual and $6,900 for a family.
Is an HSA right for you? This, of course, depends on your healthcare status and how you choose to spend and save your money. To save yourself some money, take advantage of opening an HSA if the opportunity presents itself.