Buhr & Associates

Health Savings Account


   An HSA, or Health Savings Account, is a tax-advantaged savings account that can be used to pay for current or future medical
   related expenses. It is sometimes known as a medical IRA since it has some of the same features as an IRA.  When combined with a high-
   deductible health plan, it offers savings and tax advantages that a traditional health plan can't duplicate.


How does it work?


   Employees and/or employers make tax-deductible contributions each year into a health savings account which allows employees to pay for
   current and future health care costs. Any amount that an employee does not use in any given year will roll over to the next year
   and continue to grow tax-free. If an employee uses any money for non-medical purpose, it will be taxed as ordinary income in addition to
   paying a 10% penalty. This penalty if waived if you are over the age of 65.


Maximum Contributions


   The annual maximum contribution limit for an HSA in 2016 is $3,350 for an individual and $6,750 for a family. If you are at least 55 years old
​   you can contribute an additional $1,000 in 2016.


Advantages:


  • A tax-advantaged saving account that can used to pay for eligible medical expenses as well as any deductible, co-insurance, prescriptions, vision, and dental care.
  • Any unused funds roll over year to year. There's no "use it or lose it" penalty like there is with an FSA.
  • The HSA is owned by the employee, not the employer. If the employee is terminated from his employer, any money in the HSA is the employees.
  • Once there is adequate funds in the HSA, the employee can invest this money in a variety of investment options. Most account administers have minimum balance requirements to participate in investing.
  • After age 65, funds can be withdrawn for any purpose and without penalty.  However, they may be subject to income tax if they are not used for qualified medical expenses.
  • Employees who are over the age of 55 are allowed to contribute an additional $1,000.
  • In amount the employee wishes to contribute to the HSA can be done on a pretax basis.  If an employee makes and after tax contribution, the employee can deduct 100% of this amount on his tax return.

Health Savings Account