More than 20 million American consumers took advantage of the benefits offered by health savings accounts (HSA) in 2016, according to a survey conducted by America’s Health Insurance Plans (AHIP).
The demand for HSA accounts is only growing and today we will discuss why. First a little history, the HSA account was created in 2003 so that individuals covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses. The account is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. In addition, you have the option to invest those funds as well.
What are the five primary benefits?
1. You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you don’t itemize your deductions on Schedule A (Form 1040).
2. Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
3. The contributions remain in your account until you use them and the interest or other earnings on the assets in the account are tax-free.
4. Distributions may be tax-free if you pay qualified medical expenses.
5. An HSA is “portable.” It stays with you if you change employers or leave the workforce. So hypothetically you can have a registered investment advisor like DWS manage your HSA and create a personalized investment strategy built around your healthcare needs.
How to qualify for an HSA account?
In order to be eligible for an HSA account, individuals must meet four requirements.
1. Be covered under a high deductible health plan (HDHP) on the first day of the month.
2. You have no additional health coverage except what is permitted under other health coverage definitions by the IRS.
3. You aren’t enrolled in Medicare.
4. You can’t be claimed as a dependent on someone else’s 2016 tax return.
Do you qualify? Let’s find out, schedule a call with our investment professionals today.