You may have heard of a Health Savings Account (HSA), but how do they work? Let’s make it simple. At Lowdermilk & Associates, in Greenwood Village, Colorado we have pulled together the basics for you.
For Individuals and Families
A health savings account is a specific type of savings account offered by banks, credit unions and insurance companies. The account is set up specifically for you by the bank or other investment company – all you need to do is ask. Our team at Lowdermilk & Associates can help you get an HSA in place. Many individuals and business owners choose to establish an HSA as there are significant tax savings. How? The medical costs that are paid out of the account are tax deductible. Another advantage is that any person can pay into your HSA, such as a family member.
There are limits to the amount you can put into your HSA and it can change from year to year. In 2015, you can save up to $3,350 if you are an individual, and a family can save up to $6,650. Those who are 55 and older qualify to save $1,000 more each year. Essentially, if you go to the doctor, and your health insurance has a deductible, use the HSA funds to pay it.
The money you save in your HSA can be used to pay the deductibles on health insurance, but can also be used to pay other types of care, including dental and vision that are not covered on under your health insurance policy. It should be understood that if you use your HSA for any expense other than the qualified expenses, you will be taxed, and people under 65 will also pay a penalty for withdrawing money for another purpose. If you are over 65, you will only pay your normal tax rate, and won’t face these penalties.
Health Savings Plans for Businesses
Business owners can also establish an HSA, and many choose this strategy for money-saving purposes as a valuable benefit to their employees. The business can make various arrangements, with the payment to the HSA taken out of an employee’s paycheck, as can be done for a 401(k). The contribution is pre-tax when accomplished through payroll deductions, and the employer has the option to pay some percentage on the employee’s behalf. It’s important to note that businesses have different rules with regard to establishing an HSA – differing slightly depending on the type of corporation.
The money that is withdrawn from an HSA to pay for medical expenses is not taxed – another major advantage. There are reductions in payroll tax and the interest and investment earnings your company earns are also not subject to taxation, and a business owner can save money at several different points once the account is established.
Talk to one of our friendly team members at Lowdermilk & Associates about establishing an HSA – it can save you money, and isn’t complicated.
If you already have health insurance for your family, yourself or your business, we would be happy to show you what savings you could achieve by establishing an HSA and can review your current insurance to help you see if this type of account could save you money. It’s the best way to pay your health costs, and we know exactly what to do. Call us!