Texas HSA Plans
Uncle
Sam wants to help pay for your health insurance
By taking advantage of
the tax savings offered by HSA (Health Savings Account) plans, you will see a dramatic
reduction in your health insurance premiums. In some cases, premiums
are completely canceled out by the tax savings.
You do not have to
be self-employed or even itemize on your income taxes to take
advantage of these plans. If you happen to be self-employed, the
tax savings are even greater. You owe it to yourself to investigate
these plans.
A
Simple Explanation of Health Savings Accounts (HSAs)?
You can read the rest of this site for some more details,
but here is a simple explanation of what these plans are all about.
There are two parts
to HSA's; the health insurance part and the savings part.
The health insurance
is a high (relatively high) deductible PPO plan. There are certain minimum
and maximum out of pocket limits that are required by law. You pay a
premium each month for the health insurance just like you do for any
other plan. However, these plans are relatively inexpensive.
At the same time,
you are permitted to put away a certain amount of money each year into
a special savings account (the Health Savings Account). This is in addition to the premium you pay
for the health insurance. The money you put into the account:
| - |
It
is your money. It does not belong to the insurance company. |
| - |
You don't lose
it at the end of the year. It rolls over and continues to build. |
| - |
You receive
interest on it. |
| - |
For every dollar
you put into the savings account, you can take a dollar off of your
gross income on your taxes. This is the tax savings part. |
| - |
As long as
you use the money in the savings account for medical expenses, even
expenses that are not covered by the plan, you will never pay tax
on the money. |
The idea is to
give you all of these tax advantages and use the savings account to
pay for the out-of-pocket expenses. It really works. You will save a
bundle with these plans.
What
are Health Savings Accounts (HSAs)?
A Texas Health
Savings Account is a tax-exempt account with a financial institution
in which you accumulate savings to pay for medical expenses. Contributions
and income earned on funds in the accounts are 100% TAX FREE as long
as you use the money for a qualified medical expense. The account allows
you to enjoy tax reductions while having affordable premiums and decreasing
your out-of-pocket expenses without risking your insurance protection.
The money in the
account does not dissappear at the end of the year. It rolls over to
the next year and does not effect how much you can contribute each year.
You cannot have
a Health Savings Account without having a qualified health insurance
plan. You can pretty much forget about using your current health insurance.
There are a number
of places where you can set up a Health Savings Account. The money can
be put into CD's, mutual funds, stocks, etc.
Health Savings
Accounts Benefits
1. Contributions are taken off of your gross income (even
if you don't itemize)
2. Interest or other earnings on the assets are tax free, money grows
tax deferred
3. Money saved can be used for qualified medical expenses
4. HSA funds can also be used to pay COBRA or other medical insurance
premiums during periods of unemployment or temporary layoff
5. You never have to take the money out of the HSA. Contributions remain
in your HSA until you use them. At age 65, unused HSA money can be withdrawn
(but you don't have to )for non-medical reasons without penalty (similar
to an IRA, ordinary income tax will be charged on the money withdrawn
for non-medical reasons).
What may
an HSA be used for?
Amounts that have accumulated
in an HSA are intended to be withdrawn and used for actual medical expenses
(for a list of the qualified expenses go to the IRS Publication
502) . If amounts contained in an HSA are not needed for medical purposes,
they may, however, be withdrawn penalty-free for other uses after the
individual reaches age 65, or if death or disability occur.
Otherwise, a 6 percent
penalty applies. All non-medical distributions are included in ordinary
income for tax purposes. In addition, HSA savings can - like IRA assets
- be rolled over to another HSA once every 12 months, but may not be
combined with IRA assets.
Actual HSA
Plan Example
To bring all of this to life
I will give you a simple illustration. This illustration will use a
Plano zip code 75024 and a couple in the 30% tax bracket. I'll use a
male of 40 and a female of 35. They are are self-employed and deduct
their health insurance off of their income tax.
The monthly premium
for a $5100 deductible 100% plan is $201 per month.
Remember that once this couple reaches $5100 in medical expenses, everything
is covered 100%.
The are permitted
to put in a maximum of $483 a month into their Heallth Savings Account
(5800/12)
Tax deduction for
health insurance is (.3 X $201) = $60.30
Tax deduction for
their contribution is (.3 X $483) = $145.00
Total tax deduction
is $205.30
At the end of the
year our couple has virtually eliminated their premium and put $5800 in an interest
bearing savings account. With the government giving them 30% on their
money plus the insurance company paying another 2% - 4%, can you now
see why these plans are so popular?
This is
why I love HSA plans!
We represent a number of
different carriers and can help you find an HSA plan that will keep
most of your insurance premium in your own pocket. Give us a call for
a free instant quote and answers to all of your questions.
800-272-0512
Mon - Fri 9 A.M. to 7 P.M. / Saturday 9 A.M to 2 P.M.
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