HSAs (health savings accounts) allow Americans under age 65 to make tax-deductible contributions to a special account tied to a high-deductible health insurance policy. Earnings inside the HSA are tax deferred (just like in an IRA). To be eligible to contribute to an HSA, you must have a qualified insurance policy. Please contact us for details as tow hat determines a “qualified insurance policy”.
Money from the HSA can be used tax- and penalty-free to pay the insurance policy deductible, co-payments and any other qualifying medical expenses. Money left in the account at the end of a year can be rolled over to the next year. The penalty for withdrawing HSA funds for non-qualifying purposes before age 65 has been doubled to 20% penalty. After you reach age 65, contributions to the HSA must cease, and non-qualifying withdrawals are taxed but not penalized.
To learn more about a Health Savings Account (HSA) or to discuss any other tax and Accounting related questions, please feel free to contact us.