Health Savings Accounts are quickly becoming more widely known and used, for the benefits they can offer uninsured people is quite tremendous. These accounts all tax-deductible and conditions and tax-free distributions, so long as the money is used for medical expenses.
The funds the account can later be withdrawn as retirement income if desired, giving a dual use as both a medical account and a retirement savings account. If this sounds intriguing to you, let's look at the eligibility requirements needed in order to qualify.
1. Firstly, both you and your spouse must not have access to any other form of health insurance coverage, whether that coverage is being used or not. Having dependents with health insurance coverage is allowed though.
2. To qualify, the holder must purchase a high-deductible health insurance policy of at least $1,100 for oneself, or $2,200 for a family.
Should you qualify you'll be able to take advantage of the following tax advantages.
1. Contributions to these accounts are all considered above-the-line deductions, making itemization of these deductions unnecessary.
2. Should the account holder be above 65, as premiums paid towards a tax-qualified policy become deductible with some exceptions. Those under 65 who are unemployed are also entitled to regular medical premium deductibles.
3. All distributions from the account used to pay medical expenses are tax-free. This can include over-the-counter drugs and other remedies as well. Virtually anything related to the medical field qualified, save for cosmetic procedures or items.
4. Best of all, any unused money in the account can eventually be used for retirement, unlike traditional health insurance, in which an premiums paid are lost, regardless of how many claims are made.
There are additional benefits beyond just the tax benefits listed. The following example illustrates how this insurance can solve a traditional dilemma that exists for families with expected long-term health care needs, as to how they can fund both their retirement, and the inevitable health care costs.
The sample couple own their own business, and do not have access to group health care insurance. With a history of health problems in one or both member's families, they're not sure whether their simple self-employed 401(k)retirement fund will see them through what may lie ahead.
With a Health Savings Account though, they can contribute as much as $5,650 each year, in addition to a catch-up contribution, depending on age. Any long-term health care costs can then be paid distributed from the account. The money in their account also grows tax-free until its eventual use, or can be tax-deferred until its use as retirement income. They could move some of the money from their 401(k) into their HSA as well.
Health Savings Accounts make a lot of sense, and certainly come at the right time with the rising amount of freelance and self-employed workers without access to health coverage just like using a zero interest balance transfer card to lower credit card debt. Even better is that there really is nothing to lose, as the contributions are guaranteed to prove useful at some point, one way or the other.
The funds the account can later be withdrawn as retirement income if desired, giving a dual use as both a medical account and a retirement savings account. If this sounds intriguing to you, let's look at the eligibility requirements needed in order to qualify.
1. Firstly, both you and your spouse must not have access to any other form of health insurance coverage, whether that coverage is being used or not. Having dependents with health insurance coverage is allowed though.
2. To qualify, the holder must purchase a high-deductible health insurance policy of at least $1,100 for oneself, or $2,200 for a family.
Should you qualify you'll be able to take advantage of the following tax advantages.
1. Contributions to these accounts are all considered above-the-line deductions, making itemization of these deductions unnecessary.
2. Should the account holder be above 65, as premiums paid towards a tax-qualified policy become deductible with some exceptions. Those under 65 who are unemployed are also entitled to regular medical premium deductibles.
3. All distributions from the account used to pay medical expenses are tax-free. This can include over-the-counter drugs and other remedies as well. Virtually anything related to the medical field qualified, save for cosmetic procedures or items.
4. Best of all, any unused money in the account can eventually be used for retirement, unlike traditional health insurance, in which an premiums paid are lost, regardless of how many claims are made.
There are additional benefits beyond just the tax benefits listed. The following example illustrates how this insurance can solve a traditional dilemma that exists for families with expected long-term health care needs, as to how they can fund both their retirement, and the inevitable health care costs.
The sample couple own their own business, and do not have access to group health care insurance. With a history of health problems in one or both member's families, they're not sure whether their simple self-employed 401(k)retirement fund will see them through what may lie ahead.
With a Health Savings Account though, they can contribute as much as $5,650 each year, in addition to a catch-up contribution, depending on age. Any long-term health care costs can then be paid distributed from the account. The money in their account also grows tax-free until its eventual use, or can be tax-deferred until its use as retirement income. They could move some of the money from their 401(k) into their HSA as well.
Health Savings Accounts make a lot of sense, and certainly come at the right time with the rising amount of freelance and self-employed workers without access to health coverage just like using a zero interest balance transfer card to lower credit card debt. Even better is that there really is nothing to lose, as the contributions are guaranteed to prove useful at some point, one way or the other.
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