Saving money on health insurance and healthcare can be tough. On top of a hefty monthly premium, you might also need to meet a high deductible in order for your health plan to help pay your bills.
That’s where health savings accounts come in.
Health savings accounts, commonly referred to as HSAs, are a lot like personal savings accounts except the money you put into them is used to pay for qualified medical expenses. For 2017, you can open and contribute to a HSA if your health insurance plan is considered a “high deductible health plan.” Your plan is a high deductible health plan if:
- Your self-only plan has a deductible of $1,300 or more
- Your family plan has a deductible of $2,600 or more
- Your self-only plan has a maximum out-of-pocket of $6,550
- Your family plan has a maximum out-of-pocket of $13,100
HSAs are a no-brainer for a lot of people with high deductible health plans, and these are 5 reasons you should consider one, too:
1. You get a triple tax advantage that you can’t get from anything else.
First, contributions to a HSA are reported as adjustments to your income on your 1040 (or pre-tax if you’re contributing through your employer’s payroll). This means you do not pay taxes on the amount of money you contribute to your HSA. Second, the money in your HSA may gain interest or investment returns tax-free. Third, when you use the money on qualified medical expenses, your withdrawals are tax free! There is no other savings method that has as many tax advantages as a health savings account.
2. If you have an individual plan you can contribute up to $3,400 and if you have a family plan you can contribute up to $6,750.*
The maximum amount you can contribute to a health savings account is determined each year, based on inflation. The amounts above are how much you can contribute in 2017. Deducting these amounts from your taxes by contributing to your HSA can have a real impact on your taxes in 2017, and can help you put money aside for healthcare costs (either expected or unexpected).
*If you’re 55 or older, you can contribute an additional $1,000 to your HSA.
3. Unlike Flexible Spending Accounts (FSAs), money in your HSA rolls over from year-to-year.
All money you contribute to your HSA is yours to keep. The money rolls over from year-to-year which allows people to use HSAs as a long-term strategy for saving money for expected healthcare costs (like pregnancies) or for retirement, when healthcare costs are usually higher.
4. The money can be used for any qualified medical expense.
You can use the money from your HSA on things called “qualified medical expenses,” which may include more services than you realize. Qualified medical expenses include things like dental cleanings and treatments, vision exams and glasses, prescriptions, vaccines, and more. See other examples here.
5. High deductible health plans (HDHP) usually have lower monthly premiums.
When you choose a HDHP, you’re usually picking a health insurance plan that has a lower monthly premium than a copay plan. By choosing a HDHP, you can typically save money monthly, and also take advantage of the benefits of a HSA for when you do need to pay for healthcare expenses.
If you’re interested in learning more about whether a health savings account is right for you, register to attend our upcoming webinar on Tuesday, October 25 at 12 p.m. CT/1 p.m. ET.
Have other questions about HSAs? Please contact the Gravie advisors at 800.501.2920 or [email protected]. The advisors can also help you determine whether a high deductible health plan or a copay plan fits you better.