Health Savings Accounts Offer The Biggest Benefits of All

Fund Health Savings Accounts First Before Anything Else

Tax-deductible contributions to Health Savings Accounts can really have an impact on lowering your tax bill and it’s for a good cause, your healthcare. 2017 contribution limits for a single contributor is $3,400, for a family $6,750 and for those over age 55 an additional catch up contribution of $1,000.

Health Savings Accounts allow for tax-free withdrawals at anytime for legitimate medical expenses or medical, Medicare or long-term care insurance premiums. The odds are extremely high that you will use every dollar in your HSA account during your lifetime. Everyone has medical necessities and related premiums to pay, so it’s economic value is considerable. And during retirement HSA distributions are not includible in the provisional income test for Social Security taxation.

One-time rollovers from IRAs to HSA accounts: This provision allows for a once-in-a-lifetime distribution of amounts from an IRA (either a Traditional IRA or a Roth IRA), in a direct trustee-to- trustee transfer. Unless the only money available is in your Roth IRA, you shouldn’t use it. The best use of the exchange is with an IRA. Amounts distributed under this provision are not includible in income to the extent that they would otherwise be includible in income, and they are not subject to the 10% penalty tax on early distributions. The maximum amount that may be distributed from the IRA and contributed to the HSA is limited to the otherwise maximum deductible contribution amount to the HSA. No deduction is allowed for the amount contributed from an IRA to an HSA. Keep in mind that there is a testing period for contributions in a 12-month period.

The HSA accounts are one of the best provisions in the tax code that actually generates significant value to the consumer.