Maximize Your Health Savings Account
It’s not too late to maximize your Health Savings Account (HSA) contribution for 2018! You can contribute to your HSA until the tax filing deadline, typically April 15. HSA contributions are deductible as an adjustment to income on Schedule 1 of your Federal 1040. This deduction was not impacted by recent tax law changes.
Adjustments to Income: 25 Health savings account deduction. Attach Form 8889….25
You can have a Health Savings Account if you have a health insurance policy that qualifies. These policies are identified as high deductible health plans that do not offer copay benefits to pay for doctor visits or prescriptions. An account can be opened at a local bank or with organizations that have established partnerships with your insurance company. Financial institutions are responsible for the tax reporting that notifies the IRS what the total contributions and distributions are. HSA owners receive tax form 1099-SA showing total contributions and 5498-SA for distributions.
If you make contributions to your HSA in 2019 but want it applied to tax year 2018, be certain to make that clear at the bank so that the tax reporting will be correct.
The maximum contribution for 2018 is $3,450 when one person is insured under a high deductible health plan or $6,900 when there are two or more family members. An additional $1,000 contribution can be made by anyone that is age 55 or older.
If your Federal tax rate is 20% and you deposited $6,900, your federal income tax bill will be reduced by $1,380.
Anyone that has enrolled in a HSA plan through healthcare.gov and is receiving a Premium Tax Credit should definitely use this important deduction as a strategy to keep their Adjusted Gross Income within eligibility guidelines.
The money put into a HSA provides a tax benefit and a method of setting aside funds to pay for medical, dental, and vision expenses. The IRS determines what expenses can be paid from a HSA. Medical costs that are covered by your health insurance plan are eligible, however there are many other items that can be paid from a HSA even if it is not covered by an insurance plan. Dental exams, repairs, orthodontia, and artificial teeth are eligible. Vision care, glasses, and contacts can be paid from a HSA. Other HSA qualified expenses include acupuncture, chiropractic, fertility treatment, guide dogs, and hearing aids. Some over the counter medications are eligible if prescribed by a doctor.
IRS publication 969 provides the complete list of eligible expenses. Learn more at www.irs.gov/publications/p969.
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