Health
Savings Accounts (HSAs)
By: Adam Ledbetter, CFP®
The Henssler Financial Group Position Paper
The
Medicare reform bill signed into law in December 2003 by President Bush provided
a new option for health care in the form of Health Savings Accounts (HSAs).
Below
are a few facts about these accounts:
- HSAs are tax-sheltered medical savings accounts.
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Contributions are 100% tax deductible for employers, as well as either pre-tax or tax deductible for employees.
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To be eligible to establish an HSA account, you must first set up a high deductible, HSA-qualified health insurance plan. Individuals are eligible to set up an HSA if they are not covered by someone else's health insurance, are not enrolled in Medicare, and cannot be claimed as a dependent on someone else's tax return.
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Maximum contributions are $2,900 for singles, and $5,800 for families. People 55 years of age and over can contribute an additional $900 in 2008.
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Deductibles for singles are a minimum of $1,100; and $2,200 for families.
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Out-of-pocket maximums can be up to $5,600 for singles, and up to $11,200 for families.
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The contributions grow tax-deferred until needed. Money withdrawn for qualified medical expenses is tax-free. If withdrawals are not used for qualified medical expenses, then the amount will be taxable. There will be a 10% penalty for those under the age of 65.
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Money is readily accessible since most accounts offer the use of checks and/or debit cards.
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Some medical expenses not covered by medical plans may be considered qualified expenses from HSA accounts. Examples include expenses for dental, vision, alternative medicines, etc.
Determining whether HSAs are right for you will, more or less, depend on what your comfort levels are in regards to health insurance. You have to be willing to have a low-cost, high deductible, and potentially, a high out-of-pocket maximum medical plan to be eligible. Some people prefer to pay a little more for health insurance to have the lower deductible as a safety net, so again, it is about personal preference. For more information regarding this topic, please contact The Henssler Financial Group at 770-429-9166 or comments@henssler.com.
All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing.