Health Savings Accounts
Save on taxes and medical care -
all at the same time
What is an HSA?
A Health Savings Account (HSA) is a personal savings account that works with your High Deductible Health Plan (HDHP), and gives you tax deductions. By depositing any amount up to the annual maximum each year, you can grow your account tax free, and make qualified tax-free withdrawals to pay for medical expenses.
HDHP
A High Deductible Health Plan is a health insurance plan with an annual deductible of $1,150 for a single person, or $2,300 for a family. The plan also must have an out of pocket maximum of no more than $5,800 for a single person, or $11,600 for a family. If you have questions about whether or not your health care plan qualifies, you can contact your health care provider.
Contribution Limits
Currently, individuals may contribute up to the IRS limit of $3,000 per year, and families may contribute up to the IRS limit of $5,950 per year. An unlimited number of contributions for any year may be made up until April 15 of the following year (i.e. for 2009, contributions may be made from Jan 1, 2009 thru April 15, 2010), so long as the total of the contributions does not exceed the IRS limit.
For the 2010 contribution year, the limits will be $3,050 for individuals, and $6,150 for families. For person's age 55 and over, add $1,000 to the contribution limits for both 2009 and 2010.
Qualified Expenses
Qualified Expenses are expenses recognized by the IRS as being medical in nature, and are not subject to taxes or penalties. Typically, all medical, dental, & vision expenses are qualified expenses, including chiropractic care and acupuncture. In times of unemployment where federal or state unemployment benefits are being collected, account funds may be usable to pay Health Insurance premiums. Funds may also be used to pay for nursing homes, retirement facilities, and elder care - and may be used to pay for Long Term Care Insurance premiums before that.
What happens upon death of the account owner?
If the named beneficiary is the spouse, then the spouse continues using the account as an HSA. Otherwise, the account will cease being an HSA and the beneficiary(or beneficiaries) will be required to pay taxes on the fair-market value of the HSA as of the time of death, less any qualified expenses incurred by the decedent that are paid by the beneficiaries within 1 year of the death.
The power of an HSA
| Without HSA | With an HSA | |
|---|---|---|
| Income | $3,000 | $3,000 |
| Taxes (at 30% income-tax rate) | $1000 | $0 |
| Health Care Spending Power | $2000 | $3000 |
Please Contact Stellar Insurance Services to get quotes or more information.