CAS 2021 Tax Planning – # 1 HSA Health Savings Account
An HSA is a great way to save money on your 2021 taxes now!
Unfortunately, many don’t understand the concept, and that’s where we come in. We want you to keep more money in your pocket.
An HSA is merely a savings account that you pay your medical bills (not your health insurance) out of. Examples: dentist, co-pays, eyeglasses, doctor visits, prescriptions, etc.
You will get a $1 deduction for each dollar invested.
The moment you put money into an HSA, it becomes a tax deduction! And, if there are unused dollars in the account at the end of the year, it rolls over to the following year(s). We have clients with awesome savings their HSAs from previous years just waiting in case they need it for an emergency.
And, the money in your HSA can be invested in a money market fund or in mutual funds. HSAs earn money while they are not being used – and you get a tax deduction when you put money in them.
We use healthequity.com as an HSA bank (they have videos, tutorials, etc.). The HSA bank gives you a debit card, and when you go to the doctor, dentist, etc. and have to cough up a co-pay, pay for a visit, or for a prescription, you give them the card and they charge their fee against it – just like a regular debit card except you get a tax deduction!
For 2021, HSA owners can choose to save up to $3,600 for an individual and $7,200 for a family (HSA holders 55 and older get to save an extra $1,000 – and these contributions are 100% tax deductible from gross income.
Example: A family maxing out their HSA would save almost $2,000 in federal income taxes without spending any money!
You can make HSA contributions for 2021 until April 15, 2022.
Note! If you are covered by a “low deductible health insurance plan” at work, or are on Medicare, an HSA is not an option. HSAs are okay if you have a “high deductible” plan. Here is the definition per the IRS:
For calendar year 2021, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $7,000 for self-only coverage or $14,000 for family coverage.”
Thus, it is indeed possible to have an HSA if you are a family and have a deductible on your health insurance of $2,800 or more.
If you don’t already have an HSA, set one up now. If you start to contribute now, you won’t have to make a big contribution at year end.
Call us if you have questions on how to set up the plan. We are here to help!