We’ve seen how tough it can be for the federal government to decide how to help people pay for their health care, but one thing is clear – health savings accounts are here to stay.
More than 20 million people in the U.S. have health savings accounts, and about 85 percent of those accounts were opened since the beginning of 2011.*
The reason for such explosive growth in HSAs? More employers that offer health insurance to their workers are switching to high-deductible plans.
HSAs are tax-advantaged savings accounts that are paired with a qualified, high-deductible insurance plan. The accounts allow you to set aside money to pay for eligible medical expenses.
An HSA can help cover out-of-pocket expenses associated with high-deductible plans, as well as many dental and vision expenses.
The employer and the person covered both can contribute to an HSA, and an employer contribution is a tax-free benefit.
You can make contributions to your HSA through a pre-tax payroll deduction or directly into your account, with a deduction on your next tax return.
The other good news is that you pay no tax when you use your HSA money, as long as you’re paying for qualified medical expenses (see IRS Publication 502 for a list of those expenses).
The maximum contribution allowed in 2017 is $3,400 per year for individual coverage and $6,750 for family coverage. If you are 55 or older, you can make an additional contribution of $1,000 annually.
You can make the maximum contribution each year that you are covered by the qualified plan and your account continues to grow, year after year.
*Employee Benefit Research Institute
Bill Parson, HIA®, is a Financial Services Representative in the Everence office in Lancaster, Pennsylvania.