Now that 2015 open enrollment for health insurance is right around the corner, you may be thinking about what plan to select. While you’re making comparisons, don’t overlook tax perks available with older health care benefits.
Here are two.
- Health Care Flexible Spending Accounts. Also known as health FSAs, these accounts are established by your employer. You choose whether to participate on a yearly basis.You can deposit as much as $2,500 (for 2014) into your FSA. Deposits you make are free from payroll and withholding tax. Withdrawals are also tax-free when you spend FSA funds on out-of-pocket medical expenses such as prescription drugs or medical equipment.
Be aware that the money in your account belongs to your employer and you generally have to use the entire amount by the end of the plan year or forfeit the balance. However, your employer may offer a 2½ month grace period during which you can use any remaining funds to pay current-year expenses. Alternatively, your employer can offer the option to carry over up to $500 to use for the next year.
- Health Savings Accounts. HSAs are a combination of a high-deductible health insurance policy and a savings account. You use the funds in the savings account to pay health-related expenses for costs such as deductibles and co-pays.Contributions you make to your HSA are deductible on your federal income tax return. Contributions your employer makes, if any, are not subject to federal income or payroll taxes. Your withdrawals are tax-free when you use the money for unreimbursed medical expenses. Finally, the money in your HSA belongs to you, and you can carry the balance to future years.
Give us a call as you evaluate your 2015 health insurance options. We’ll help you select the benefits that work best for you.