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Health Savings Accounts Help Your Taxes – and Your Health

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By    |   Monday, 01 April 2019 06:00 PM

With Tax Day right around the corner, creating a Health Savings Account (HSA) for yourself is a fantastic way to set aside money on a pre-tax basis to pay for qualified medical expenses and lower your overall health-care costs.

The untaxed money you sock away in your HSA can be used to pay for deductibles, co-payments, co-insurance, and other medical expenses.

“It’s kind of like a second IRA,’’ says Eva Rosenberg, author of the best-selling book “The Trump Tax Cut: Your Personal Guide to the New Tax Law.”

“Once the money is in the HSA, you can leave it there to grow until you get old or face an emergency,” Rosenberg says.

For the 2018 tax year, individuals may contribute up to $3,450 and families up to $6,900.

The HSA, created in 2003, is designed to cover out-of-pocket medical expenses for those with a high-deductible insurance plan.

What’s more, HSA funds roll over year to year if you don't spend them. And an HSA may earn interest, which is not taxable.

Some health-insurance companies offer HSAs for their high-deductible plans and you can also open an HSA through some banks and other financial institutions.

An HSA is considered “portable,” meaning that it stays with you if you change employers or leave the work force.

“The contributions to this account can come off the top of your wages if you have a job. Or your employer can pay the money for you without you facing any taxes,” Rosenberg says.

Your insurance company can also send you a debit card to use in pharmacies, hospitals, doctors’ offices and other medical offices.

But Rosenberg warns that the debit can only be used for eligible items. That means items such as makeup, food and beverages shouldn't be bought through an HSA.

“The IRS is wise to this. Just showing that the charge took place in a pharmacy, CVS, Walgreens and so on is not enough. You must have a receipt for the purchase, and it must be for a legitimate medical expense,” she says.

There are also a number of twists and turns in the HSA law, so it’s best to read "The Trump Tax Cut" guidebook, adds Rosenberg.

Not everybody will want to opt for a high-deductible insurance plan.

That’s because the high costs that are needed to meet the deductible for an expensive medical procedure can be devastating to the family budget.

And even if you are in a high-deductible plan, you’ll want to think through whether an HSA is right for you.

Because if you withdraw funds for non-qualified expenses before you turn 65, you'll be hit with taxes on that amount as well as a 20 percent penalty. If you are 65 or older, you'll owe taxes on non-qualified, withdrawn funds, but not the penalty.

Note: "The Trump Tax Cut" is the #1 Amazon best-selling guide to the new tax law. Get your copy at bookstores everywhere or check out the FREE OFFER – Click Here How.

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With Tax Day right around the corner, creating a Health Savings Account (HSA) for yourself is a fantastic way to set aside money on a pre-tax basis to pay for qualified medical expenses and lower your overall health care costs.
health, savings, accounts, taxes, hsa
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2019-00-01
Monday, 01 April 2019 06:00 PM
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