HSA for America

Saving Strategies
the Insurance Exchange
Won't Tell You About:

How to Lower Your Taxable Income,
Increase Your Premium Tax Credits, and Save

September 1, 2013
Vol. 9, Issue 9

Your 2013 Adjusted Gross Income will determine how much you will have to pay, for what level of coverage, under the new plans that are approved under the Affordable Care Act (also known as Obamacare). By maximizing your HSA contribution, you may lower your income enough to greatly affect how your health insurance works, and how much it costs, in future years.

Lower Your Income by Contributing to an HSA

Increasing the amount of money you put into your HSA is a smart, legitimate way to lower your taxable income. Every dollar you contribute to your HSA is listed on line 25 of your Form 1040 and is directly deductible from your income.

Anyone who does not have a “grandfathered” health insurance plan (one that has been in force since March 23, 2010) will be required to switch to a new plan that is in compliance with the Affordable Care Act. Premiums for these plans in 2014 will be based on your income in 2013, so lowering your reported income this year could make a big difference in what you pay next year.

Another Dollar - Another Tax Bracket

People who purchase new health insurance coverage in 2014 will choose from Bronze, Silver, Gold, and Platinum plans. A family earning less than 400% of the federal poverty level will be required to pay no more than 9.5% of their income, for the second least expensive Silver plan.

In 2013, that limit is $94,200. A family of four earning $100,000 would therefore not qualify for any tax credits, and they would be responsible for the full amount of the premium, as well as any deductibles, coinsurance, and co-payments.

If this family obtains an HSA-qualified health policy, and funds their account with the fully-allowable $6,450 each year, they would be able to lower their income to below $94,200, and thus qualify for tax credits that would limit their premium.

How Your Income Level Will Affect More Than Just Premium

Your adjusted gross income not only affects the tax credits you may qualify for, but it can also affect the maximum out-of-pocket you may have to pay for medical care, before your coverage kicks in and pays 100%.

Save More by Contributing More to Your HSA

For instance, the maximum out-of-pocket expenses on a Silver plan for a two-person family earning $31,020 would be $10,400.  By reducing their adjustable gross income by just one dollar, their maximum out-of-pocket drops to just $4,500. 

So a family earning $37,469 could contribute $6,450 to their HSA, and in doing so reduce their out-of-pocket maximum by $5,900, an amount almost equivalent to their HSA contribution.

Keeping More of Your Dollars Just Makes Good Sense

Everyone is required to carry an approved plan starting sometime in 2014, or pay a tax penalty. People who have a grandfathered plan will be able to keep what they've got, but everyone else will be required to convert to one of the approved plans.

If you have coverage now, you don’t have to change until the anniversary date of your policy.  In many cases, that will not be until December of 2014. But remember that if you are close to or below 400 percent of the federal poverty level, anything you can do now to lower your adjusted gross income may affect your premiums and coverage under the new program.

If you don’t have an HSA-qualified plan now, you will need to get one with an effective date no later than December 1st in order to make a contribution for 2013, and lower your 2013 income. Of course, even if you are not going to qualify for a tax credit, you should still maximize your HSA contribution in order to lower your tax bill on April 15th. And, putting money away to protect yourself and your family from future medical expenses is simply a smart thing to do.

Open enrollment on the new plans starts October 1st, for an effective date of January 1st.

If we can help you devise the best strategy to keep your costs down, please let us know.



To your health and wealth!

Wiley Long
President - HSA for America


HSA for America
749 S. Lemay Ave, Suite A3-116
Fort Collins, CO 80524
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