A Health Savings Account may be a smart choice
Whether you’re a small business owner trying to attract and retain employees, or seeking to set up your own benefits, a health savings account may be a smart choice. Why do we say that? Let’s take a look at what a health savings account (HSA) can do for you.
Spend less for Healthcare
The most immediate benefit you’ll see is that you will start to keep more of your money, instead of paying insurance companies. You will be getting a high deductible health plan (HDHP), which costs less per month than other health insurance policies. You will still get full coverage for regular preventive healthcare visits, and possibly more, so don’t worry about that part. Meanwhile, the money you put into your HSA will carry over from year to year. If you don’t spend it, you keep it.
Tax-advantages for HSAs
These tax-advantaged accounts let users save for medical expenses. HSAs are known for their triple tax advantage: Contributions are made pre-tax, growth is tax-free, and withdrawals used for qualified health care expenses are also untaxed. Those qualified expenses even include services like dental care, which are often not covered by health insurance.
Note that we said that growth is tax-free. Yes, individuals can invest the money in their HSAs while it is not being used.
Limitations of HSAs
You can contribute as much to an HSA as you want, up until a certain amount. Contribution limits are currently $3,600 per year for an individual or $7,200 for a family, but in 2023 the limits are going up to $3,850/$7,750. If the individual is 55 or older, the limit is up to $1,000 higher.
And as mentioned above, distributions from HSAs can be tax-free, too. What about using it for other purposes, however? If you’re over 65, you can use those funds for anything you like, but those distributions will be taxed as normal income. If you’re 64 or under, a 20% penalty will be added in addition to that amount being taxed as income.
Fees for an HSA
At our agency, Dan Rhoads partners with HSAs that come with zero fees for individuals, and only $2.95 per person per month for small businesses, as of the posting of this blog post.
Who Benefits Most from HSAs
If you are a healthy individual, you might want to consider an HSA. Being healthy now, you will not need to spend money from your health savings account soon, and benefit more from your account’s tax advantages.
Contact Dan Rhoads today to inquire more about HSAs and what one could do for you.
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“Health Savings Account (Glossary),” Investopedia.com. Accessed 14 Sept 2022. https://www.investopedia.com/terms/h/hsa.asp
“High Deductible Health Plan (Glossary),” Healthcare.gov. Accessed 14 Sept 2022. https://www.healthcare.gov/glossary/high-deductible-health-plan/
“Tax-Advantaged (Definition),” Investopedia.com. Accessed 14 Sept 2022.
“Publication 502 (2021), Medical and Dental Expenses,” Internal Revenue Service. Accessed 14 Sept 2022. https://www.irs.gov/publications/p502