Tax Deductions For Your HSA
Learn How to Reduce Your 2016 Taxes by $3,350 or More With a Health Savings Account!
The contribution you make to your health savings account (HSA) is 100 percent tax-deductible up to a limit of $6,750 for a family and $3,350 for an individual. Your HSA-qualified health insurance must be in place by December 1st in order to qualify for a current year tax deduction. Therefore, we recommend getting your application submitted no later than November 30th.
You can withdraw money from your account at any time. If the money is used to cover medical expenses, you never pay any taxes on it. Any money not used grows tax-deferred, like an IRA. IMPORTANT: you must have your HSA insurance in place before December 1st in order to qualify for this valuable tax deduction for 2015.
HSA Federal Tax Deduction Information
- HSA Tax Deductible Contributions
- Tax-subsidized Expenses of an HSA
- HSA Premium and Tax Savings
- HSA State Income Tax Information
Tax Advantages of a Health Savings Account
Since they first became available in the beginning of 2004, Health Savings Accounts have rapidly gained popularity, particularly among individuals and small businesses. Here are 9 ways an HSA can offer tax advantages over traditional health insurance arrangements:
Reduce your federal income taxes. Regardless of how your income was earned, any money you deposit into your Health Savings Account is considered an "above-the-line" deduction, giving you a 100% write-off against adjusted gross income.
Reduce your adjusted gross income, helping you to qualify for other lucrative tax breaks tied to overall income. By reducing your adjusted gross income, you may also qualify for additional tax breaks. For instance, the child tax credit of $1,000 begins to be phased out once a family's adjusted gross income exceeds $110,000. Keep your AGI below this number, and you maintain the full $1,000 tax credit per child.
Reduce your state income taxes. Federal adjusted gross income is also the starting point for most state tax assessments, so saving on your state income tax bill is possible as well. Find detailed information on our HSA state income tax page.
Tax-deferred growth. Like funds in an IRA, the money in your account grows free from federal taxes. You do have to pay taxes if the money is withdrawn for non-medical expenses, but there is no penalty if you are over 65 years old.
Pay for dental expenses with pre-tax dollars. Dental expenses from checkups and cleanings, to braces, to toothpaste, can all be paid for with pre-tax dollars from your HSA account. You may even purchase prepaid dental plans with funds from your HSA account. See our Low cost dental plans.
Pay for vision care with pre-tax dollars. You can use HSA funds to pay for checkups, glasses, contact lenses, prescription sunglasses, cleaning fluids, and other expenses related to your eye care. View the list of HSA qualified expenses.
Pay for alternative care with pre-tax dollars. Health insurance doesn't typically pay for treatments like chiropractic, acupuncture, homeopathy, ayurvedic medicine, herbal medicine, various forms of "energy" healing, faith healing, or any number of other so-called alternative treatments. One of the advantages of Health Savings Accounts is that the individual consumer has the right to choose their source of medical care, instead of that decision being made by an insurance company or HMO. Therefore, there are very few restrictions on the type of treatment you choose.
Pay Medicare expenses with pre-tax dollars. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through a former employer, you can also use your HSA to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or "Medigap" policy.
Pay for long-term care insurance with pre-tax dollars. Long-term care premiums can be paid for from your HSA, up to $390 for those under age 40, $730 if you're between 41 and 50 years, and up to $4,870 if you're 71 years or older.
A Health Savings Account (HSA) enables anyone with a qualifying high-deductible health insurance plan to shelter up to $6,750 from federal income taxes. By reducing your adjustable gross income, enabling you to pay for medical expenses with pre-tax income, and through tax-deferred growth, HSAs can reduce your income taxes.
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