The tax deadline that is coming up in four months is also an important date for health savings account (HSA) contributions. Similar to an IRA, you have the option of electing whether or not you want to apply the contributions to the 2015 or 2016 tax year. Find out the best ways to use your health savings account by reading about HSA contribution limit.
HSA contribution limit for 2015
You can contribute up to $3,350 for individual health insurance coverage and $6,650 for family coverage and an additional $1,000 if you’re 55 years or older. To contribute to a health savings account, you must have a high-deductible health insurance plan of at least $1,300 for individual coverage and $2,000 for a family plan.
What is the tax benefit of HSA?
It works similar to a traditional 401(k). Specifically, the tax deduction health savings account contributions lowers the account holder’s modified adjusted gross income. In addition, the contributions grow tax-deferred and can be withdrawn tax-free to pay for current and future medical expenses. Unlike a flexible spending account (FSA), the account holder does not have to use the funds by the end of the year.
What medical expenses qualify for a health savings account?
Account holders can apply out-of-pocket medical expenses to their health savings account. This would include co-payments for medical care and prescription drugs, your deductible, and other items that aren’t covered by insurance such as routine dental work. Please note that most health savings account administrators provide the covered individual with a debit card to use for these expenses.
How much does a health savings account cost?
Many employers cover the fees associated with the account such as administrative costs. If you have an individual or family plan you opened yourself, you may be subject to a start-up fee and then a $3 to $5 monthly fee and/or transaction fees. It shouldn’t cost you more than $50-$100 annually, but be aware of the transaction fees. There are also other fees for items such as excess contributions, copy of account and tax statements, and account closures.
Do you have more personal tax questions? If so, please contact us.