God Bless The H.S.A.

In 2010 I'm signed up for an HSA. Here's why! (Courtesy of HSA for America):

Health Savings Accounts are helping individuals and families save thousands of dollars on their income taxes. These tax-favored accounts, which have only been available since January of 2004, can be opened by anyone with a qualifying high-deductible health insurance plan. Once you open an account, you can place tax-deductible contributions into it, which can then be used later to pay medical expenses. Any money not used grows tax-deferred, like an IRA.

Since they first became available in the beginning of 2004, HSA's have rapidly gained popularity, particularly among individuals and small businesses. Here are 10 ways an HSA can offer tax advantages over traditional health insurance arrangements:

Reduce your federal income taxes. Regardless of how your income was earned, any money you deposit into your Health Savings Account is considered an "above-the-line" deduction, giving you a 100% write-off against adjusted gross income.


Reduce your adjusted gross income, helping you to qualify for other lucrative tax breaks tied to overall income. By reducing your adjusted gross income, you may also qualify for additional tax breaks. For instance, the child tax credit of $1,000 begins to be phased out once a family's adjusted gross income exceeds $110,000. Keep your AGI below this number, and you maintain the full $1,000 tax credit per child.


Reduce your state income taxes. Federal adjusted gross income is also the starting point for most state tax assessments, so saving on your state income tax bill is possible as well. Find detailed information on our state income tax page.


Tax-deferred growth. Like funds in an IRA, the money in your account grows free from federal taxes. You do have to pay taxes if the money is withdrawn for non-medical expenses, but there is no penalty if you are over 65 years old.


Pay for dental expenses with pre-tax dollars. Dental expenses from checkups and cleanings, to braces, to toothpaste, can all be paid for with pre-tax dollars from your HSA account. You may even purchase prepaid dental plans with funds from your HSA account. See our Low cost dental plans.


Pay for vision care with pre-tax dollars. You can use HSA funds to pay for checkups, glasses, contact lenses, prescription sunglasses, cleaning fluids, and other expenses related to your eye care.


Pay for alternative care with pre-tax dollars. Health insurance doesn't typically pay for treatments like chiropractic, acupuncture, homeopathy, ayurvedic medicine, herbal medicine, various forms of "energy" healing, faith healing, or any number of other so-called alternative treatments. One of the advantages of Health Savings Accounts is that the individual consumer has the right to choose their source of medical care, instead of that decision being made by an insurance company or HMO. Therefore, there are very few restrictions on the type of treatment you choose.


Pay for aspirin, bandages, cold medicine, and other household medical expenses with pre-tax dollars. Virtually all expenses related to the treatment or prevention of a medical condition can be paid from your Health Savings Account. View the list of HSA qualified expenses.


Pay Medicare expenses with pre-tax dollars. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through a former employer, you can also use your HSA to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or "Medigap" policy.


Pay for long-term care insurance with pre-tax dollars. Long-term care premiums can be paid for from your HSA, up to $260 for those under age 40, $490 if you're between 41 and 50 years, and up to $2,600 if you're 61 years or older. Find out more about long term care insurance.

A Health Savings Account (HSA) enables anyone with a qualifying high-deductible health insurance plan to shelter up to $5,450 from federal income taxes. By reducing your adjustable gross income, enabling you to pay for medical expenses with pre-tax income, and through tax-deferred growth, HSAs can reduce your income taxes.