When you think about the importance of a health savings account, or an HSA, the internal discussion usually involves the many benefits they provide to the end-user. Even as a business owner, you’ve likely always been more concerned with the various tax incentives and benefits related to the funds in your personal HSA. Many business owners don’t realize that there are also very real and important tax benefits to the employer for providing access to an HSA benefit. Read on to learn all about the many benefits for all involved in having an HSA as an employee benefit in your business.
Benefits For Employees
For individuals, an HSA has what is referred to as a triple tax incentive, meaning that there are three distinct ways that you can save on taxes with them. First, you can make your HSA contributions pre-tax, meaning that they come out of your paycheck before your taxes are computed and you don’t get taxed on that portion. If you contribute after taxes, you can claim them on your tax return and lower your tax liability, possibly getting some of those taxes back. Second, when you spend your HSA on qualified medical expenses, those are usually tax-free, meaning that you don’t have to pay sales tax on them. Finally, unlike its cousin the FSA, HSA funds are not use-it-or-lose-it. Those funds can sit and grow until you need them and then you can use them as you see fit.
Benefits For Employers
You care about your employees, so those benefits to your employees are nice (especially if you are also one of the employees taking advantage of them), but there are also benefits to your business. If you have your health savings accounts program set up through a cafeteria plan, and your employees are actively using and contributing to their HSA’s pre-tax, it will also limit your tax liability. As the employer, you pay a portion of their employment taxes, so when their tax liability goes down, so does yours. This may not seem like much if only one or two people are taking advantage of the program, but the more that do the bigger the impact will be. Also, remember that simply offering the HSA as a benefit to your employees can be a smart financial decision. It may make you a stronger candidate for potential hires over places that don’t offer benefits, without contributing substantially to your bottom line.
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