3 Major Tax Advantages Of An HSA

You may have already invested in a 401(k), an individual retirement account or 529 college savings plan. But if you haven’t yet utilized an HSA (Health Savings Account), don’t feel bad – many people haven’t even heard of it yet.

A Health Savings Account allows the account owner to pay for current health care expenses and save for future expenses, as long as you’re enrolled in a high-deductible health plan. Qualified expenses include most services provided by licensed health providers, as well as diagnostic devices and prescriptions.

An HSA is not a health care “flex” account, which has a maximum year-to-year carry over. HSAs have no such restriction, as the money belongs to you. You can open a Health Savings Account on your own through Sentry Bank, or your employer may offer a plan through us as well.

If you don’t already have an account with us, contact us today to get set up and start utilizing it for the benefit of these three major tax advantages!

1. Contributions Are Tax-Deductible/Pre-Tax

The contributions you make to your HSA are 100% tax-deductible (or taken pre-tax from your paycheck) up to a limit of $6,750 for a family and $3,400 for an individual in 2017.

For example, if you make $40,000 pre-tax and you put $3,000 in your HSA that year, you will be taxed as though you make $37,000, thus lowering your tax burden.

2. Interest Earned Is Tax-Free

The interest you earn is tax-free as well! Any interest accrued in your account doesn’t count against your income for tax reasons, meaning an HSA is a great tax-sheltered investment as long as the money remains in the account.

3. Qualified Withdrawals Are Tax-Free

And if you do finally need to access your HSA to pay for qualified medical expenses, as long as the expenses qualify you can withdraw the money tax-free! Besides the above mentioned qualified expenses, co-pays, deductibles and coinsurance are also qualified.

Withdrawals can be made via an HSA debit card, check or reimbursement depending on your preference.