As we close in on the end of the year, here is a tax strategy that can save you a lot of money. Health Savings Accounts (HSAs), when used effectively, offer a triple tax advantage and are an excellent tool for managing healthcare costs.
An HSA is more than just a savings account. It's a powerful financial tool designed for individuals with high-deductible health plans. These accounts allow you to set aside pre-tax income for medical expenses, offering significant tax benefits.
Contributions to your HSA reduce your taxable income. For 2023, the maximum contribution limits are $3,850 for individuals and $7,750 for families. If you're 55 or older, there’s an additional catch-up contribution of $1,000.
With an HSA, you can pay for a wide range of medical expenses, including deductibles, co-payments, prescriptions, contact lenses, glasses, and other costs not covered by insurance. Consult with your tax advisor if you have questions about what qualifies as an expense so you can plan your healthcare spending wisely.
Like all income and expenses when it comes to taxes, proper documentation is crucial for tax-free HSA withdrawals. Be sure to keep detailed records and receipts as you use the funds in your HSA.
Many individuals are unaware of the full potential of HSAs or are hesitant to use them for fear of losing unspent funds (HSAs are not “use-it-or-lose-it” accounts). HSAs are a very effective way to help you pay for medical expenses not covered by insurance and optimize your tax situation.
If you have questions about your HSA or would like a comprehensive review of your personal or business situation to minimize your tax liability, Iota Financial is here to help. Schedule a complimentary consultation today:
