For Americans facing increased taxes and rising health care costs, the tax advantages and cost-effectiveness of a health savings account (HSA) may be particularly appealing this year. Different plans require specific documentation, so be sure you understand how to file your medical claims to achieve the full benefit of pre-tax savings.
HSAs pair a tax-advantaged savings account with a qualified high-deductible health insurance plan, which typically costs less in monthly premiums when compared to more traditional health insurance. HSA savings are deposited into a tax-deferred account and can be withdrawn tax-free when used for qualified medical expenses, which include health insurance deductibles as well as dental, vision and other types of care often not covered by health insurance.
For 2012 tax purposes, deductible contribution limits are $3,100 for individuals and $6,250 for families. HSA holders 55 and older can contribute and deduct an additional $1,000. HSA contributions in 2013 are tax deductible up to $3,250 for individuals and up to $6,450 for families. Consumers with HSAs have until April 15 to contribute and maximize their 2012 deductions up to the legal limit.
“HSAs enable consumers to save on taxes and health costs today while saving for retirement health care,” said Patrick Carr, president of UnitedHealthcare’s Golden Rule Insurance Company.
Carr points to a recent study by Fidelity Benefits Consulting which estimates that a 65-year-old couple who retired in 2012 will need $240,000 just to cover their medical costs in retirement.
Insurance industry trade group America’s Health Insurance Plans (AHIP) reported in 2012 that more than 13.5 million Americans with individual or employer group coverage had an HSA-qualified plan, an increase of 18 percent from 2011.