An HSA (Health Savings Account) is a practical way to save for medical expenses and reduce your taxable income. It’s like an IRA for your health care costs. To be eligible for an HSA, you must have a qualifying HDHP (High Deductible Health Plan).
The 2016 annual HSA contribution limit for individuals with HDHP coverage is $3,350 (no change from 2015), and the limit for individuals with family HDHP coverage is $6,750 (a $100 increase from 2015). If you are 55 or older, you can make “catch-up” contributions, meaning you can deposit an additional $1,000 per year. If your spouse is also 55 or older, he or she may establish a separate HSA and make a “catch-up” contribution to that account. You have until the tax-filing deadline (generally April 15) of the following year to make allowable contributions.
Once you are on Medicare, you no longer can contribute to an HSA, however you can use funds already in your account to cover some Medicare costs, including deductibles, copays, vision and dental care. Those on Medicare can also use HSA funds to reimburse themselves for money that’s deducted from Social Security to pay Medicare Part B premiums. Although HSA funds cannot be used for Medicare Supplement insurance plan premiums, they can be used to pay Medicare Part D premiums, Medicare Advantage plan premiums and a portion of long-term-care insurance premiums.
Unlike other Flexible Spending Accounts, money you do not spend each year stays in your account providing you with a tax-advantage. Your money goes in tax-free, grows tax-free and comes out tax-free when you use it for qualified medical expenses.
Once an HSA reaches a certain threshold, the funds can be invested in mutual funds. The earnings from these funds are tax free as long as they are eventually used for qualified medical expenses.
If you have a High Deductible Health Plan (HDHP) and are interested in setting up an HSA, talk to your employer or contact a local bank for details.
For answers to your other questions on Life, Health, Dental, Vision, Annuities or Medicare Advantage Plans, please contact me at 440-255-5700 or email me at Lmutsko@mutskoinsurance.com. I look forward to serving you.