When considering which Texas health insurance plan is right for you, it’s smart to look beyond just the traditional PPO and HMO options and to consider a Health Savings Account (HSA). HSAs were created as part of the Medicare Reform Act of 2003 and provide consumers with a tax-exempt way to accumulate funds to pay small medical expenses; HSAs are typically coupled with a high-deductible insurance plan to protect against major medical expenses. These plans were created in response to the rising cost of health care with the intent to give consumers more control over their health care costs, and in many cases, HSAs reduce premiums by 30-40% on an annual basis.
With 2010 upon us and many people needing to either sign up for a Texas health insurance plan or make changes to existing plans, below are 20 reasons to consider an HSA in the New Year, as compiled by HSA Resources.
1. Deduct up to $8,150 on Your 2009 Tax Return – You can deduct your HSA contribution and save money even if you do not itemize your taxes. With deduction amounts of up to $8,150 (family maximum contribution of $6,150 for 2010 plus two $1,000 catch-up contributions if you are between 55-65) the tax savings can be substantial.
2. Take a full deduction even if you start your HSA mid-year – You can take a full deduction ($6,150 family, $3,050 single plus catch-up) even if you start mid-year. In order to get the full deduction amount, you must start your high-deductible health insurance plan no later than December 1, 2010.
3. Transfer money from your IRA into your HSA – You can roll money from your Individual Retirement Account into your HSA. You are limited to the amount you are eligible to contribute to your HSA for the year, and you cannot make a double contribution. This is a once in a lifetime option, and you must do this as a trustee-to-trustee transfer to be eligible. See this IRA to HSA Worksheet for details.
4. Pay for eligible medical expenses tax free – If you have a high-deductible health plan, you must open your HSA before you incur any medical expenses. Use your HSA to pay for eligible medical expenses tax free.
5. No use-it-or-lose-it provisions – There’s no need to spend the end of the year stocking up on glasses, contacts and other things you don’t need just so you can spend everything that’s left in your health care account. With an HSA, the fund belongs to you, and there are no use-it-or-lose-it provisions. Any unused funds stay in your HSA for your benefit in the future. Even better, earnings on the HSA are not taxable.
6. Take control of your medical spending – High-deductible health plans and HSAs give you more control over your health care expenses and let you use your money in your best interest.
7. Start accumulating savings for retirement – Use your HSA funds for retirement at age 65 and get basically the same tax treatment as IRAs and 401(k)s.
8. Simplify your life – You can stop submitting receipts and use a debit card or checks to pay expenses.
9. Keep your medical expenses private – Your medical receipts are kept private and not shared with your employer. However, you do need to save your receipts for tax purposes.
10. Start earning interest for medical savings in 2010 – Tired of deferring money each year into a medical reimbursement account that pays no interest and takes your extra money at the end of the year? Companies like HSA Resources allow money put into an HSA to be invested so individuals can earn interest.
Click to see the full list of reasons to open an HSA in 2010.
