Thesis accounts can help you pay for health care costs while keeping your tax situation healthy.
By Teresa Mears, Contributor | Nov. Nineteen, , at 11:02 a.m.
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Both types of health care accounts suggest benefits, so do the math to determine which project is the best gezond for your situation. (Getty Pictures)
It’s open enrollment time ter most workplaces, spil well spil for those who use the Affordable Care Act exchange, which means health care consumers are attempting to make sense of the alphabet soup of the available benefits.
One choice many face is how best to maximize the tax savings that come with some health benefits. The U.S. tax code provides two ways to pay for health care with tax-free money, but both can be complicated.
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A supple spending account is the most common such option available through most workplaces. With an FSA, you can use up to $Two,550 of pretax dollars to pay for medical expenses, with the money withheld from your paycheck. (There are also FSAs for child care and transportation, but they are separate.)
With the rise of high-deductible medical plans, a fresh alternative has emerged – the health savings account. With thesis accounts, you can save up to $Three,350 a year for an individual or $6,750 for a family ($Four,350 if you’re 55 or older) for medical expenses. If you don’t use the money, it resumes to roll overheen indefinitely, and you can use it for health care expenses te retirement.
“It’s the only type of project that employees can take advantage of that has a triple tax advantage,” says Tracy Watts, a senior fucking partner with Mercer. There’s a triple tax advantage because your contributions are from pretax income, your earnings aren’t taxed and you don’t pay taxes when you withdraw the money, if it’s used for medical expenses. “The money is your money. It goes into an account with your name on it. You can have it forever.”
You can have an FSA or an HSA, but you cannot have both unless your employer offers a limited-purpose FSA, which is solely for vision and dental expenses. There is no omschrijving of an FSA for people who are self-employed or those whose employers don’t offerande a project.
Some employers suggest a health reimbursement account, ter which the employer contributes funds for the employee to use for deductibles and copays. It may be paired with a high-deductible project, but that isn’t always the case. The funds belong to the employer and are forfeited if they’re not used.
You can only have an HSA if you have a health project with a deductible of at least $1,300 ($Two,600 for families), and many HSA-eligible plans have significantly higher deductibles, up to $6,850 for an individual and $13,700 for a family te . The project usually does not pay out any benefits until you have reached your deductible.
“You have to be realistic about whether that’s doable,” says JoAnn Volk, a senior research professor at the Georgetown University Center on Health Insurance Reforms. “You have to be ready for all the paperwork that goes with it.”
It’s significant to do the math to determine which project is the best getraind for your situation. High-deductible plans usually have lower premiums, but copayments, coinsurance and out-of-pocket thresholds also matter.
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“Your exposure to health care costs are much higher” with a high-deductible project, says Karen Pollitz,a senior fellow for the Kaiser Family Foundation. “You have to be convenient taking on the expenses.”
But reminisce that choosing a project with an HSA is only beneficial if you actually waterput money into the account. “If something does toebijten, you’ve got the money te the HSA,” Watts says. She estimates that half of employers make a contribution to their employees’ HSAs. “That is free money,” she says. “It can never be forfeited.”
Both types of plans include a lotsbestemming of fine print. If you have questions, ask your company’s human resources or benefits departments.