It’s the new year. That means that as you’re probably settling into your new routines and trying hard to keep your New Year’s resolutions, you may also be starting to think about what’s next: filing your 2022 taxes. And if you’ve got a Health Savings Account (HSA), that means considering your HSA tax advantages, benefits and things to consider. But first, let’s start with the basics:
What Is An HSA?
An HSA is a tax-deductible health savings account that allows you to grow your contributions tax free. Most HSAs are included with certain medical insurance plans (specifically high deductible plans). You can use your HSA to pay for medical expenses, eye care visits (and glasses), dental bills, medicines, and more.
If you know you have an expensive medical procedure coming your way soon, it may make sense to contribute to an HSA dependent on your individual situation. Not only will you be able to contribute tax-free, you’ll also be able to receive tax benefits at the end of the year. But as always, there’s a catch: Not everyone can open an HSA and there’s yearly contribution limits . . . more on that later.
Quick FAQs About Your HSA
An HSA may be an ideal way to pay for your yearly medical expenses—tax-free. But if you’ve never had one, it comes with a few questions. Here’s some quick FAQ’s to help you get started:
Am I Eligible For An HSA?
Anyone with a high deductible health plan is eligible to open an HSA account. You also cannot be claimed as a dependent on anyone else’s taxes. That means, you’re either a head of household filer, single, or married filing jointly. If you’re enrolled in a Medicare plan, you won’t be able to take hold of the HSA tax advantages either.
Does My Health Plan Offer An HSA?
It all depends on your specific health plan, but more often than not, an HSA is available for those with high deductible health plans (HDHP). For singles with a high deductible health plan, you have to pay an annual deductible of $1,500 with an out-of-pocket max of $7,050.1 And for families, that number grows to $3,000 and $15,000 respectively.2
How Much Can I Contribute in 2023?
Just like with traditional IRAs and Roth IRAs, there’s a limit to how much you can actually contribute to your HSA. Here’s what you can expect for 2023:
Individuals: $3,850 | Source: 3
Families: $7,750 | Source: 4
If you’re over the age of 55 and want to “catch up” on your contributions, the IRS allows you to make an extra contribution of $1,000 each year.
Are HSA Contributions Tax Deductible?
Absolutely. When you contribute to your HSA through an employer, they fund your account with pre-tax money. That means that any money you spend from your HSA will be tax-free. But if you decide to fund your account after you get paid, you’ll end up putting after-tax dollars in there. But here’s the best part: you can receive tax advantages or deductions when you contribute after-tax dollars. Just be sure to keep track of any contributions and spending throughout the year.
If you’re wondering how to get the most out of your HSA, including HSA tax advantages, a SageSpring Wealth Advisor is here to help. We can help you determine your eligibility, help you make sure you’re striving to get the most out of your contributions, and see if you’re due any tax deductions from your 2022 HSA spending. Want to learn more? Contact a financial advisor in your area today.
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