What are health savings accounts?
Health savings accounts (HSAs) are similar to IRAs, except they are intended for medical expenses rather than for retirement. You can make a tax-deductible contribution for 2008 of up to $2,900 to an individual HSA or $5,800 to a family HSA. If you’re 55 or older, your annual contribution can be $900 or higher. If your employer makes the contribution as part of a cafeteria benefits plan, it isn’t taxable to you. Earnings on investments made with your contributions won’t be taxed currently, and withdrawals are also tax-free if they are used for a broad range of medical expenses. There are restrictions. To be eligible for an HSA, you must be covered by a health plan with a deductible of at least $1,100 annually for an individual or $2,200 annually for a family. These “high deductible” health plans can save you money, since they should have lower premiums. You must be under 65, and therefore not eligible for Medicare, when opening an HSA. If you withdraw HSA funds for non-health expenses,
Health Savings Accounts offer you a means to save money on employee health insurance. For smaller companies, HSAs provide a means to affordable health insurance for you and your employees. Created by the Medicare bill that was signed into law on December 8, 2003, an HSA is a tax-free fund that works in conjunction with a High Deductible Health Plan (HDHP). The insured sets up a HSA as a way to pay their primary medical expenses that fall below the deductible of their HDHP, such as doctor visits and prescriptions. They put money into a HSA and these funds are invested according to their instructions. The contributions are above-the-line deductions, meaning that the contributions reduce taxable income. Also, if not used by the insured, HSA contributions build up year to year. HDHPs are sometimes termed “catastrophic” insurance, because they only begin paying once your medical expenses reach the deductible. This is often anywhere from $1,000 to $5,000, depending on the policy and its prov
