Health Savings Accounts (HSA) contribution limits have been increased for 2018. This is another excellent reason for considering a HSA plan when your employer’s ‘open enrollment’ period comes around again. A HSA plan can provide a triple tax benefit to you and your family:
- All contributions are tax-free – When you contribute to an HSA, you lower the income that is subject to taxation. As a result, you’ll pay no taxes on the contributions you’ve invested in your HSA account. You have until the tax deadline of the following year to contribute to an HSA for the current year.
- Earnings generated from your HSA account are tax-free -You can even invest your contributions in mutual funds and the earnings will be tax free.
- Finally, distributions from the account are tax-free – As long as funds are spent on qualified medical expenses, there is no tax or penalty on distributions.
Paying medical expenses from your HSA account immediately discounts your true out of pocket medical expenses by 25% or more depending on your tax bracket. This is an immediate and ‘real world’ reduction in the cost of healthcare and you won’t have to wait for an act of congress to accomplish it. If your employer offers a HSA option, consider it- it just may be the best choice you make this year!