Introduced in the year 2003 under the administration of President George Bush, HSA, also known as Health Savings Account, is primarily a tax exempt account that you set up to save and set aside money to pay for qualified healthcare/medical expenses.
HSA Tax Breaks and Benefits
Setting up this account offers investors with triple tax advantages that no other kind of retirement plan can match, such as:
- Contributions that you make are tax deductible
- These contributions grow tax free
- Withdrawals are not taxed if you use them for qualified healthcare expenses like dental care, prescription drugs and doctor’s visits
Other benefits that you can enjoy by setting up HSA are:
- Contributions that are made by employers to employee HSA accounts are excluded from the gross income
- The contributions remain in the account until you use them
- The account is portable which means it stays with you even if you resign from the current job and start working for another employer.
Qualification Requirements for a Health Savings Account
To enjoy all the benefits of HSA that we’ve discussed above, you must first meet the qualification requirements. To be eligible for an HSA:
- You must have a High Deductible Health Plan (HDHP). Unlike a traditional health insurance plan, a High Deductible Health Plan has a high deductible and low premium. Though the premium is lower, in HDHP, you have to pay more healthcare cost before the insurance company starts to pay its share. To qualify, health plans for single people should have a deductible of at least 1,300 US dollars and at least 2,600 US dollars for family coverage.
- You should not have any other health coverage except what is permitted to you under Other Health Coverage
- You should not be enrolled with Medicare
- You cannot claim as a dependent on someone else’s tax return
TrumpCare and HSA
Now that you know the basics of HSAs, let us take a look at how TrumpCare plans to use HSAs:
TrumpCare provisions that passed the House on May 4 2017, plans to double the HSA contribution limits, giving more flexibility to the people in how they can use and spend money in their tax exempt accounts. Analysts believe that if it is enacted, it will be a win-win for both employers and employees as it will make it much easier and simpler for people to use their HSA accounts and likewise, for employers to administer them. Additionally, it will also increase both the employee’s and the employer’s ability to make contributions to the employees’ Health Savings Accounts.
Given the benefits and tax breaks that HSAs offers, the growth of these accounts is inevitable. In fact, according to a report published by a Minneapolis based firm, Health Savings Accounts have grown to about 37 billion US dollars in assets, and twenty million HSA accounts were opened by the end of 2016. It is forecasted the accounts will increase by 20 percent, reaching over 53 billion US dollars in 2018.
To learn more about HSA or for assistance with setting up a Health Savings Account, call JS Benefits Group on 877-355-6070.
