Health Saving Accounts Offer Last-Minute Tax Savings

Health Saving Accounts Offer Last-Minute Tax Savings

If you’re like most consumers, the year end doesn’t just signal post-holiday shopping deals; it’s also a time to look for ways to keep more in your pocket with tax-saving strategies. And if you have an existing Health Savings Account (HSA), you need look no further.   

2011 Contribution Limits

It’s not too late to contribute the full allowable amount into your HSA to save on your 2011 taxes. That’s because consumers have until April 15, 2012, to contribute $3,050 for individuals and $6,150 for families. Over age 55? You are able to contribute an additional $1,000. But remember that these amounts are totals, which means they include both self-made contributions as well as any received from an employer.   

Triple Tax Advantage

The amount you contribute to your HSA is part of a triple tax advantage: tax-free contributions, tax-free withdrawals and tax-free interest earned on savings.   

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

Contributions are deposited into your account pre-tax if made through an employer’s payroll deduction, or as an above-the-line deduction at tax-time if you contribute using after-tax money. And money withdrawn can be spent on qualified medical expenses for you or family tax dependents without penalty or tax. Since HSA funds roll over from year to year, you can also earn interest on any money not spent on qualified expenses.  

Don’t forget, however, that there are penalties for misuse. Nonqualified withdrawals are taxed at your income rate plus a 20% penalty, except for those age 65 or older.  

The High Deductible Plan Requirement

To have an HSA, you must also have a qualified high deductible health insurance plan with a minimum deductible of $1,200 individual/$2,400 family for 2011.  

Changes for 2012

Planning for 2012? The minimum qualified health plan deductible remains the same for next year, but the IRS has increased the amount you can save in a health savings account to $3,100 for individuals and $6,250 for families. Individuals over age 55 can still contribute an additional $1,000.   

So take full advantage of your HSA and give yourself a gift this (tax) season.

Amy Gallagher has over 19 years of healthcare industry experience.  As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.

For more health coverage, watch GoLocalTV, live every day at 4pm, and on demand 24/7, here.