Megapolis Insurance

Health Savings Accounts are attractive because contributions to these accounts are tax deductible on federal income tax returns. The choice of making Health Savings Account (HSA) deposits deductible on state tax forms is left up to each state. Almost all states have chosen to follow the federal example on this and Wisconsin is the latest state to adopt that legislation beginning with the 2011 tax year.

Individual coverage health plans that can be combined with an HSA have a deductible of at least $1,200. Family HSA plans have deductibles starting at $2,400. These high-deductible plans usually cost much less than co-pay plans, which don’t require policyholders to meet a deductible.

Once Health Savings Accounts are funded, they can be used to cover the deductible. Since HSA contributions are tax deductible, both the premium and tax savings can be channeled into the HSA.

Forty-seven states allow residents to take a state tax deduction for a Health Savings Account.

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Healthy as we may seem today, we never know when illness can strike. Would switching from a full-coverage plan to a high-deductible health plan with a health savings account (HSA) be a wise decision to make? What if you need to meet a high deductible? You may be surprised to find that when you add up how much you can save on premiums and by reducing your taxes, it could actually cost less even if you do have to pay for health care until a high deductible has been met.

If you have good health and do not need much medical care, a high-deductible insurance plan that has low premiums can be a “no brainer.” If you are in a high tax category, an HSA or Health Savings Account can definitely help lower your federal income tax and state income tax in almost all states. Even though you may have to pay for health care until you meet that high deductible, if you get new coverage now, you won’t have out-of-pocket costs for preventive services. Those are 100-percent covered with health care reform.

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Proponents say that only Health Savings Accounts separate health care from insurance. For example, say you have family coverage through work that costs the employer $12,000 annually. If your employer pays for all the premiums and you have $25 co-pays to see a doctor, your expense is limited.

In contrast, if your employer still spends $12,000 a year, but puts $5,000 of it into a Health Savings Account (HSA) in your name, $5,000 of your health care benefit is now legally yours. Instead of a co-pay plan, your employer must buy a High-deductible Health Plan that’s qualified to work with an HSA.

Preventive care is 100-percent covered, but you’ll have to pay for other services until the deductible has been met. Any Health Savings Account funds you don’t spend on health care are yours to keep. That’s distinctly different from Flexible Spending Accounts, which are “use it or lose it” at the end of the year.

Each year, your employer contributes $5,000 to your HSA. As long as your health remains good, the balance in the HSA account can grow with tax-free earnings. It’s yours to keep if you change employers or retire.

Although Health Savings Accounts have been around since 2004, many people are still missing out on the tax savings they offer because they don’t understand how a Health Savings Account (HSA) works.

HSA Plans are really simple. They’re so easy to use that you don’t even need to itemize deductions to take advantage of their savings when you file your taxes.

Kathy Pickering of H&R Block says, “You put your money into the Health Savings Account tax free, and then it grows tax free. The interest you earn on it is tax free, and when you take money out for qualified medical expenses, that’s tax free as well.” Any HSA funds you don’t spend on qualified health care, unlike money left in a flexible savings account, just roll over year to year and continue earning tax-free interest.

Pickering points out that: “If you can hold on to your Health Savings Account, say as you lose your job, if you move to a new job, you can still use those funds and then if you can hold on to it until retirement.

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