If you are looking to save money on insurance premiums and taxes, a health savings account program is an excellent benefit choice. HSA programs work well for individuals and families, as well as for employers of all sizes.
Nearly 19.7 million Americans are now covered by HSA qualified health plans. Check out the full report on Americans covered by HSA programs: 2020 Devenir & HSA Council Demographic Report.
The concept is simple. Think of a three-legged stool:
1st: You start with a qualified health plan. When you are enrolled in a qualified high deductible health plan, as defined by the IRS, you have the right to open and fund a health savings account with tax-free dollars.
2nd: You open your health savings account with a bank of your choice. You are allowed to contribute up to IRS determined contribution limits each tax year. Your contribution limit is based upon whether your HSA qualified health plan covers you or you and one or more dependents. The IRS Dollars contributed to your health savings account enjoy special tax advantages.
3rd: You utilize health and wellness tools offered by your insurance company or other organizations to learn how to improve your health, how to use your benefits to your best advantage, and to compare medical services and service providers when you need to seek care. Having a higher deductible health plan gives you a great incentive to really pay attention to the care you need, and to the cost of that care.
Many people save significantly on their health plan premiums, and use that savings to begin contributions to their health savings account. Dollars contributed to the account stay there until you decides to withdraw them. There is no use-it-or-lose-it rule, as there is with flexible spending accounts. As long as the HSA funds are used for qualified medical expenses, as defined by the IRS, you will not pay taxes on them. For many Americans, this is a significant savings.
A health savings account is a unique and valuable method for saving both federal and Arizona state taxes.
HSAs are triple tax advantaged:
1st: Contributions to your health savings account are tax deductible.
2nd: Dollars in your health savings account earn interest tax-deferred and roll over from year to year until you decide to use them.
3rd: Withdrawals from your health savings account are tax-free as long as you use them for qualified medical expenses, as defined by the IRS.
You can contribute to your health savings account until you turn 65, as long as you’re covered by a qualified high deductible health plan. When you turn 65, you can continue to spend your HSA dollars tax-free for qualified medical expenses. After you’re 65, you can also spend HSA dollars for non-medical expenses without penalty; you’ll just pay current income taxes on dollars spent for non-medical expenses.