Health Savings Accounts, or HSAs, have increased in number–in 2016, 72% of large employers provided them. There are several reasons for this, not the least of which is that it works with insurances with high deductibles. The point of an HSA is to give individuals more control over their health care savings, while keeping those savings tax-free. If you have an insurance premium that just keeps rising, you could benefit from an HSA. Read on to learn more about what an HSA entails.
How Does it Work?
The main purpose of an HSA is to protect employees with high insurance deductibles. If you are sick or injured, and your expenses do not meet your deductible, you could end up paying thousands of dollars. However, with an HSA in place, you can prepare for a situation like this over time. You can deposit money into an HSA and you don’t need any permission to do so. All you need to do is keep an excellent record of your medical expenses–otherwise, the IRS will tax your withdrawals.
How Can it Help?
HSAs are actually starting to aid in economic recovery; employees tend to see this money as their money, rather than the health insurance’s money. Therefore, they will seek out less expensive options, which could cause health insurance costs to decrease as a whole. And since HSAs are tax-free when managed correctly, more and more employees, as well as employers, are drawn to the program. With HSAs helping significantly with high deductibles, it’s possible that the ever-climbing rates of health insurance in the United States will start to become more affordable.
Are There Drawbacks?
You may still have to pay state taxes, even when you’re using an HSA. If you’re unsure of your state’s policies on HSAs, it’s important to ask for help from a tax advisor. You’ll also still be paying your monthly premium costs; however, these premiums can be lowered for those enrolled in HSA programs. Also, your HSA account should never intersect with any retirement savings, such as your 401-K. You cannot freely take your HSA money elsewhere if you decide an account isn’t for you.
If you can’t decide on whether or not to start an HSA, the Harding Group can help.
Are you having trouble working out your HSA? Trust the professionals at the Harding Group. Unlike other accounting firms, we never charge you for emails or phone calls and strive for open communication with our clients. Whether you are interested in business advising, tax preparation, bookkeeping and accounting, payroll services, Training + support for QuickBooks, or retirement planning, we have the expertise and years of experience to help. If you are ready to take the stress out of taxes, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on Facebook, Twitter, Google+,YouTube, and LinkedIn.