Health Savings Account

Medical deductions are allowed on your personal income tax return so long as the amount is in excess of a percentage (10%) of your adjusted gross income (federal form 1040 page 1) For most individuals total expenses for medical ( doctors, eyewear, hospital, therapy, drugs and other health related items) may not be deductible because the amount is not in excess of the AGI limitation. This leaves the individual self insuring.

A FSA allows an individual to set aside pre tax dollars for medical expenses. The good part:  no tax was paid on the income allocated to the FSA plan. The bad part:  Any balance at year end does not carry forward to the following year. In conjunction with a health insurance policy – the small stuff or non covered items can be paid.

A high deductible health insurance plan paired with a HSA has a unique set of features.

Contributions not spent can be carried forward with no time limit on its use. A great way to save money for heavy health costs in future years  and the contributions are a deduction against total income (form 1040 page 1 bottom line)thereby saving the participant money on that year’s taxes.

Money taken out of an account for qualifying medical expenses is not subject to income tax.

For the consumer – you must compare the policy cost and related deductible  or copays with a policy paired with an HSA account.  If the annual expense leaves funds to be carried over from year to another than you are creating a fund a fund for future health care costs- tax deferred!