Let’s talk about getting your best tax savings from a health savings account (HSA). What is a health savings account? This is an employee-owned or individually-owned account. You have control over that money. That’s your money, you take it with you, whether you leave an employer or if you have an individual plan. You keep it.
But how do you get the best tax savings out of it? A lot of people wonder about that.
If I work for an employer and I’m part of a group plan and have an HSA, a certain amount comes out of my check every week, pre-tax, and goes into that account. That is a huge benefit. Any money that comes out of my pay pre-tax and goes into that account really helps get me savings when I do my taxes the following year.
If I don’t have it automatically deducted from my pay and I deposit the money myself, I may not get that pre-tax savings immediately. The savings will show up as a post-tax deduction. When I do my taxes, I tell the IRS how much I put in this account, up to the limits set by the IRS, and I get that amount as a deduction.
You’re going to get that deduction, whether it’s throughout the year or all at the end. I know a lot of people worry, can I only get that tax savings through my employer? That’s not always the case.
What Can Health Savings Account Funds Be Used For?
“What expenses can those funds be used for” is another question I get all the time. I’ll talk to my clients about their deductibles and their copays and their co-insurances and their prescriptions. Then, a lot of people will ask, without my prompting them, “What about my dental? What about my vision?”
Those expenses can be paid with those pre-tax or post-tax dollars up to the IRS limits. It’s a really big deal.
If you need braces or if somebody in your family has braces, there’s pre-tax dollars in that HSA account for that expense. And a lot of people don’t even realize that.
Answer for More HSA Questions
Do your HSA funds stay in your account? Are they tax-free for future health expenses?
Remember, your money going in from your check pre-tax—that money will always have that tax-free benefit. You never lose that on the money that’s in the HSA unless you take it out and pay for unqualified medical expenses.
If you’re really looking for a way to fall asleep quicker, IRS publication 502 is a great way to find out all the things you can use an HSA for. But if you need to have more conversations with real answers about HSAs, please give us a call here at MBHealth Insurance at (314) 544-5400.
