Everybody's Money Matters: Benefits of Health Savings Accounts
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What are the benefits of having a health savings account?
Member, Alaska USA Federal Credit Union
Health savings accounts (HSAs) are tax-advantaged savings accounts that were created to help people save for future medical expenses. You can use an HSA to cover deductible expenses, co-pays, and other noncovered health-care expenses—for yourself, your spouse, and your dependents.
To qualify for an HSA, you must meet these requirements:
Tax bennies of an HSA
The biggest attraction to HSAs is their triple tax benefit:
In addition to tax benefits, HSAs offer other advantages as well:
In 2014, eligible individuals with single coverage can contribute up to $3,300 and those with family coverage can contribute $6,550. HSA holders older than age 55 can save an extra $1,000; $4,300 for individuals with single coverage and $7,550 for individuals with family coverage.
Though there are many benefits of HSAs, there are downsides as well:
The biggest attraction to HSAs is their triple tax benefit.
If you are interested in an HSA, check with your employer to see if it offers a high-deductible health plan with an HSA option. In some cases, the insurance company will open an HSA for you at the same time you select the high-deductible health plan, or you can open an HSA on your own, through a credit union or another financial organization that offers HSAs.
"Switching to a high-deductible health plan can substantially reduce your premiums compared to the cost of traditional health plans," says Dennis Zuehlke, compliance manager at Ascensus, Middleton, Wis., the nation's largest independent retirement and college savings services provider. "You can use those savings to contribute to an HSA, get a tax deduction for the contribution, and then pay for qualified medical expenses not covered by the high deductible health plan tax-free from the HSA. There is simply no other tax-advantaged account that offers the triple tax benefits of an HSA," Zuehlke adds.
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