Will you be deciding whether to sign up for health insurance or change your current plan when open enrollment for 2015 begins in November? If so, you may want to consider a health savings account (HSA).
These accounts, which combine a savings account and a high-deductible insurance policy, pre-date the health care laws. But the rules are still in effect and you can still benefit.
Here’s an overview.
- The basics. An HSA has two parts: a high-deductible health insurance policy and a medical savings account.
To qualify as a high-deductible policy for 2014, the minimum deductible must be $1,250 ($2,500 for family coverage) with a $6,350 cap on out-of-pocket expenses ($12,700 for family coverage).
Once you purchase a qualifying health insurance policy, you can open a savings account with a bank or brokerage firm and begin making contributions. You use the money in your account to pay medical costs.
- The income tax benefits. Contributions to your HSA are deductible on your federal income tax return, even if you don’t itemize. For 2014, you can put as much as $3,300 ($6,550 for family coverage) into your account. If you’re age 55 or older, you can make additional annual catch-up contributions of up to $1,000.
Earnings on the balance in your account such as interest or dividends grow tax deferred — and can be tax-free when withdrawals are used for qualified medical expenses.
Give us a call if you’re interested in learning more about HSAs. We’ll help you evaluate the costs and benefits.