Health Savings Accounts: Are They Worth It?

If you’re a working adult, then there is a good chance that you’ve heard of health savings accounts. You may have also wondered whether or not these accounts are worthwhile. The answer is yes, in most cases. Health savings accounts come with many excellent benefits as long as you set them up correctly.   

These accounts are basically tax-exempt trust accounts or custodial accounts. You should set them up through an experienced health savings account trustee to ensure that they are set up correctly and in such a way as to have maximum benefits for you.

As long as you do that, you can enjoy many advantages by having a health savings account. These include:

·         Tax-deductible contributions

·         Tax-free distributions

·         Allow you to save pre-tax dollars for healthcare expenses that may be incurred in the future

·         Can be paired with high-deductible health insurance plans

·         Earnings, including interest and dividends, are tax-exempt at the federal level.

·         Funds are withdrawn tax-free as long as they are used to pay for eligible medical expenses

As you can see, there can be a great many benefits to having a health savings account. If you think that these benefits could work in your favor, then talk with a financial professional about getting one set up for yourself!

Did You Know?

IRS resources decline

Fiscal year 2014 funding for the IRS was $11.29 billion, an $850 million decrease from 2010 funding. Also, from 2010 to 2014, the IRS lost 10,000 full time employees. This decrease in

resources will affect the IRS’s ability to maintain previous levels of taxpayer services and taxpayer enforcement, according to IRS Commissioner John Koskinen.

2015 HSA limits released

The IRS has released the inflation adjusted limits for deductible contributions to health savings accounts (HSAs) for 2015. For family coverage, the contribution limit will be $6,650. For individual coverage, the limit will be $3,350. Individuals who are 55 or older are allowed to

contribute an additional $1,000. HSAs let taxpayers with high-deductible health insurance plans set aside pretax contributions that can be withdrawn tax-free to pay unreimbursed medical expenses.

Facts on amended returns

Taxpayers are allowed to file amended returns if they find they have omitted or misreported an item on the originally filed return. The IRS wants taxpayers to know the following facts about

amending returns:

• Amended returns can’t be e-filed; they must be filed on paper.

• An amended return should be filed for errors in filing status, income, deductions, or credits.

• Don’t file an amended return for math errors; the IRS will correct these and notify you.

• Amended returns take up to 12 weeks to process.

• Returns can be amended for up to three years from the original filing.

Related articles

• What Are Health Savings Accounts? (themoneygeek.com)
• Cuts in IRS Budget Have Compromised Taxpayer Service and Weakened Enforcement (cbpp.org)