Health savings accounts (HSAs) can be a potentially advantageous option for high-income earners considering tax-saving strategies.
Planning for the future? Get to know more about HSAs and why they could be a good fit for people with high incomes.
How do HSAs work?
HSAs are a type of federally tax-exempt savings account specifically for health care costs. When you have an HSA, you are able to contribute to the account annually. In 2022, individuals can contribute $3,650 and families can contribute $7,300. People who are 55 and up are eligible to contribute $1,000 more per year.
Who qualifies for HSAs?
HSAs are for people who have high-deductible health insurance plans. Each year, the IRS announces the minimum deductible amount for health insurance plans to be considered high-deductible. In 2022, the minimum deductible for individual high-deductible health plans is $1,400 and $2,800 for families.
What are the tax benefits?
HSAs are known for their triple tax benefits. First, you are able to make contributions to the account pre-tax. The money in the account grows tax-free. Finally, the money you take out of the account to pay for qualified medical expenses is also tax-free.
How much can you save?
Thanks to its tax-free contributions, growth and withdrawals, an HSA can help account holders realize substantial tax savings over time. How much you save will depend on factors like how much you contribute and how you use the funds in the account to cover qualified medical expenses.
How are HSAs different from FSAs?
Flexible spending accounts (FSAs) are another type of account that can be used for healthcare costs, but they typically offer less flexibility. FSAs are owned by employers and can be lost when an individual changes jobs. An HSA carries over regardless of employment status.
Reach out today if you have questions we can help with.