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The Big Deal About Health Savings Accounts

by Kathy & Alex Falter on 10/02/14

If you’re like most people, there are two things you hate doing: paying taxes and paying medical bills. But, there is a tax-deductible option that can assist you lowering your tax bill, while also assisting you pay your medical bills. Consider opening a health saving account.

A health savings account combines health insurance with a high deductible (at least $1,250 for an individual or $2,500 for a family) with a tax-favored savings account. You make contributions to the account, which you then use to help you pay for your medical expenses. But, like any good thing, there are limits to what you can contribute and pay out of pocket for health insurance to remain tax-deductible, but the benefits far outweigh the limits.



-      -  Contributions are 100% tax deductible up to the limit

-       - Withdrawals to pay qualified medical expenses are never taxed

-       - Interest earned on the account are always tax free

-      -  There is no “use it or lose it,” it can grow tax-deferred for years

-       - You control it! It goes wherever you go!

-       - You can use it to pay for your health insurance if you’re between jobs

-       - Use it for Medicare premiums or living expenses if you’re over 65

-       - When you open an account, you're given a credit/debit card so it's incredibly easy to use!

- Pay qualified long-term care premiums

What else could you ask for? Everything works within limits:



- Minimum Health Insurance Deductible that will qualify you for an HSA: $1,250

- Maximum Out-of-Pocket: $6,350

- Contribution Limit per year to an HSA: $3,300

- 55+ Catch Up Contribution: $1,000



- Minimum Health Insurance Deductible that will qualify you for an HSA: $2,500

- Maximum Out-of-Pocket: $12,700

- Contribution Limit: $6,550

- 55+ Catch Up Contribution: $1,000


How do I open a Health Savings Account?

Many banks and credit unions offer them now.   Check with your financial institution or do a search for “Health Savings Account”.   Be aware of their terms and fees as they vary.  



A Financial Institution that allows you to transfer money from your personal account to the Health Savings Account electronically instead of by check.  Your money will be credited in about 48 hours instead of a week to 10 days for a check by mail. 

If you know you have a doctor’s appointment “a week from Tuesday” and the copay is $50 you can transfer money in advance of the charge and get the best tax benefit.?


 Some financial institutions charge fees for maintaining the account.  Do your homework.


A health savings account is a great way to answer some of life’s most annoying  problems and if it is at all feasible for you, we at PPb are happy to recommend it.

PPb Super Tip:

If you go to pay a medical bill and you do not have enough money in your Health Savings Account to pay for what's due, then you can pay it out of your regular checking account and later reimburse yourself out of the HSA, making everything tax deductible once more!