How Can a Health Savings Account (HSA) Help You Save on Taxes?
Amherst, NH Resident Has Questions
An HSA (Health Savings Account) allows you to invest pre-tax money into an account that can be used to pay for qualified health care related expenses. The tax-free contributions deposited into the HSA will reduce your overall taxable income. The money in the account can be rolled over from year to year while earning interest, depending on the type of account.
A resident in Amherst was looking for ways to save on his taxes. Having heard of an HSA account, he contacted the experts at Merrimack Tax Associates for advice.
Eligibility for an HSA
In order to be eligible to utilize an HSA you must be enrolled in a high-deductible health plan. This is a deductible with a minimum of $1,400 annually for an individual and $2,800 for a family. Those with this type of insurance can deduct a maximum of $3,650 for individuals and $7,300 for families for 2022. This maximum contribution can fluctuate from year to year. If there is money leftover at the end of the calendar year in the HSA, this can be carried over into the following year.
Money in an HSA account can be used for a variety of medical expenses. This includes prescriptions, doctor copays, dental and vision treatment. Alternative healthcare can also be paid through money in an HSA, including acupuncture, chiropractic, fertility treatments, and many other health-related products that are purchased.
HSA Deposits Can Be Deducted from Tax Returns
The entire amount that is deposited into the HSA account can be deducted on your tax return, regardless of whether you are itemizing deductions. Any contributions that are made directly from an employee’s paycheck are made with pre-tax money. This reduces the overall gross income, which can affect your end of year taxes owed.
The Amherst resident now has a better understanding of how an HSA works. In the coming year, he plans to set up this account and begin taking advantage of the tax deductions that this offers.