Health Savings Accounts or HSAs are still available under ObamaCare or the Affordable Care Act. Many people don’t know the benefits to purchasing a health care plan that has the option of a health savings account or even what a Health Savings Account is. Today, we are going to answer those questions for you.
Health Savings Accounts Made Easy
A Health Savings Account or HSA is a medical savings account that provides certain tax advantages. Money is deposited into an account to be used for medical related expenses. Important aspects of HSAs or Health Savings Accounts in 2014 include:
- Health Savings Accounts have to be paired with a high deductible health insurance plan. In 2014, the deductible must be above $1,250 for an individual and $2,500 for a family.
- The money put into this account is not subject to federal income tax – as long as it’s used for its intended purpose.
- Those intended purposes are certain out-of-pocket health care expenses.
- Employers can even hold the accounts and make contributions.
- You may purchase a HSA privately.
- You are able to invest $3,300 for an individual and $6,550 for a family federally taxed free dollars according to the IRS. For those over 55 years old in 2014, an addition $1,000 may be invested.
How Health Savings Accounts Can Benefit You
HSAs can offer many benefits. In our article, How to Make Obama’s Bronze Plan Work For You, we shared that if you chose any of the bronze plans, you are required to cover 40% of your medical costs. By pairing a HSA with your bronze plan, it helps take the sting out of that 40%.
As long as the money is used for medical related purposes, the money that you put away is never federally taxed. I will shed light on that in a moment.
If you are someone who doesn’t normally use a lot of medical services, HSAs are a great way to have a lower monthly premium. If a medical cost does happen, you can use your HSA money to help with the unexpected medical costs.
Another great benefit to HSAs is that if you invest $3,300 this year and don’t use it, that $3,300 rolls over to next year. This is unlike the Flexible Spending Account (FSA) that does not rollover and the money must be spent within the same tax year.
Health Savings Accounts Restrictions
When the Affordable Care Act went into effect so did a few restrictions to these plans including:
- You are no longer able to use the money from a HSA to pay for over-the-counter medications. You must have a doctor’s prescription.
- If the HSA money is used for a non-medical purpose, it is subject to a 20% tax penalty.
If you are interested in purchasing a Health Savings Account for yourself, your family, give our office a call. We can walk you through the steps to purchasing an HSA account and answer any additional questions you may have.
847-397-5300 or toll free 800-317-0181