How Do Health Savings Accounts Work?
You may have heard of a Health Savings Account (HSA) and are wondering how they really work. Let’s make it simple. Thankfully, 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 can help you get an HSA in place. Many individuals and business owners choose to establish a health savings account because of the 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, especially a family member.
There are limits to the amount you can put into your health savings account and it can change from year to year. In 2015, you could save up to $3,350 if you were an individual, and a family could 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 that are not covered on under your health insurance policy, including dental and vision. 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 and as a valuable benefit to their employees. The business can make various arrangements and have the payment to the HSA taken out of an employee’s paycheck as can also 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 is important to know that businesses have different rules with regard to establishing a health savings account, with each business differing slightly depending on the type of corporation.
The money that is withdrawn from a health savings account to pay for medical expenses is not taxed – another major advantage.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 about establishing a health savings account – it can save you money, and isn’t complicated. We are local, so we can be reached easily whenever you need help or have questions. 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 we can review your current insurance to help you see if this type of account could save you money. It is the best way to pay your health costs, and we know exactly what to do. Call us today!