It’s neither duck season, nor rabbit season. Tax season is in full swing and my friends either:
A) Owe Uncle Sam and are offering their able bodies for Craigslist modeling gigs to pay their dues.
B) Scour the internet for the biggest tv their tax return can buy.
My entrepreneurial friend is the wisest with her money and when it comes to health insurance, she uses an HSA. It doesn’t surprise me when she says she saved thousands of tax-free dollars and can spend them on any healthcare service she wants. So how does she do it, what’s an HSA, and where do I sign up?!
An HSA (Health Savings Account) is exactly what the name implies: a savings account. To start an HSA, you need to have a high-deductible insurance plan. With this plan, you have low monthly premiums, but in the off-chance you are hurt or sick, you pay out-of-pocket until your deductible is reached, then any costs afterwards are covered by your insurer. For every paycheck, some money goes towards your HSA. This money is not considered income and therefore cannot be taxed.
You choose which prescriptions or treatments your HSA pays for because it's an individual-owned savings account, not an insurance plan. The tangible HSA usually comes in the form of a check or debit card, which you sign or swipe at the doctor’s office. The saved HSA money pays for most preventive care services, the list of which (beginning on page 5 of the IRS’ website) is exhaustive, but includes anything from birth control and Braille magazines (which someone may have to tell you if you cannot read this on a computer screen) to hospital visits and vaccinations.
As previously mentioned, the money is not only tax-free but funds in your HSA gain tax-free interest over time (like a retirement plan) and can be carried over from year to year; i.e., the money doesn't vanish if you don't use it by the end of the plan year. Likewise, you don't lose the account or money within if you leave your employer. The HSA, funds, and interest earned go with you.
However, HSAs are not the health equivalent to offshore accounts in the Bahamas. There is a limit on how much tax-free money one can save in an HSA. This is known as the contribution limit. Obamacare (PPACA or Patient Protection Affordable Care Act) regulations indicate that for individual plans the contribution limit is $3,250; for a family plan, it’s $6,450. That’s more than enough money for a cruise to the Bahamas (although you can't exactly use it for a cruise), so start an HSA today!
For more information on HSA or other insurance plans, contact us at 818.251.5000 or click here for an instant quote today!