HSA "secret" formula: Lower premiums + lower taxes = BIG savings
- Carry a low cost, high deductible health plan
(HDHP) instead of a high priced plan with a low deductible and co-pays. (you could save several thousand dollars a year in premiums!)
- Transfer the money saved on premiums into a special tax-sheltered savings account. Because all of these deposits are 100% tax-deductible "above the line," you instantly lower your tax bill each time you merely deposit money into your savings account. (that's the really cool part!)
- Withdraw money from the HSA on a tax-free basis to pay routine medical bills during the year.
- Most larger expenses are covered under your high deductible health plan (after the deductible has been satisifed, subject to policy terms, benefits, and limitations).
- What you don't use
from the HSA account each year stays in the account and continues to grow on a tax-deferred basis, just ike an IRA. In fact, HSA plans are often referred to as "medical IRA" plans because they help supplement your
retirement, just like an IRA.
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