November 25, 2015
If you are taking advantage of the current open enrollment period for health insurance, you may be considering what’s called a health savings account—or HSA—plan. While selecting a health insurance plan is an important process, just as important is an understanding of the tax-related advantages that come with some of those plans. And an HSA in particular—whether you already have this type of health insurance plan or are looking to sign up for one—can afford you some tax benefits that you may not know about:
Deduct from your taxes – You can claim tax deductions for contributions you make to your HSA, even if you don’t itemize those deductions on a Form 1040.
Make contributions – Any contributions—yours or someone else’s—remain in your account until you use them. And contributions from your employer to your HSA may be excluded from your gross income.
Earn tax-free interest – The interest you earn from the HSA is tax-free. As well, distributions from the account may be tax-free if you use them to pay qualified medical expenses incurred by you or your spouse and/or all dependents claimed on your tax return.
Keep the account – Your HSA is portable, which means you won’t lose it if you change employers or leave the work force; rather, the account stays with you as long as you choose to keep it open, allowing you to continue to earn tax-free interest (see above).
Cover out-of-pocket medical expenses – You can spend the money in your HSA—tax-free—on any medical expenses that are not covered by insurance. These include your deductible, copays, prescription drugs, or other bills that may not be covered, such as vision and dental care.
As always, make sure to check the specific details of the HSA plan you are considering or already have, since they may differ from what’s stated above.
It’s important to know that as the rules around health insurance plans and the Affordable Care Act continue to evolve, you may need to talk to a Denver tax specialist to help you navigate these subjects and keep you informed of changing tax benefits and liabilities. Bloch, Rothman & Associates brings over 20 years of accounting and tax preparation experience to Denver, providing services such as tax planning, tax resolution, personal and business tax preparation, and much more. Contact us today at 303-321-7160 or fill out the form on our website to set up a free initial consultation.