A Quick Overview of Health Savings Accounts - So You Can Save Money
Why Care About a Health Savings Account (HSA)?
Updated Jan. 23, 2022
A lot of small businesses don't realize how many benefits they can get from HSAs - including lower insurance premiums and many tax advantages.
An HSA is owned by the employee and opened through their employer.
Employers, the employee, or any third party, can contribute to this account tax-free, but there are different limits for individuals and for families, depending on the tax year.
What is a Health Savings Account (HSA)?
A Health Savings Account is a tax-advantaged medical savings account for taxpayers enrolled in an HSA compatible, high deductible health plan (HDHP).
Again, the funds contributed to the account aren't subject to federal income tax at the time of deposit.
With an HDHP, the monthly premiums are lower and your out-of-pocket cost is higher, so an HSA account helps you pay for some of this expense.
More and more employers are offering this kind of consumer-directed health plan (CDHP) to their employees as a way to lower costs and still maintain quality benefits.
Worth noting, there are other high deductible plans you can also pair with tax advantaged plans such as Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs).
With the HSA, however, you have triple the tax advantages by way of contributions, investment earnings, and amounts distributed for qualified medical expenses. These are all exempt from federal income tax, FICA tax and most state income taxes.
“Another way to see the benefits of using an H.S.A. account is to consider you get to pay an unwanted expense, a medical or dental bill with a 25% to 45% discount or whatever your current tax bracket level is - not a bad return on your savings account!”
Quick Highlights of an HSA
👉 HSAs are owned by the employee and they're portable from one employer to the next - or even into retirement. Financial contributions can be made by both the employee and the employer, and funds can be rolled over.
👉 For 2022, the maximum HSA contribution limits are $3,650 for an individual and $7,300 for family coverage. You can view all of the updated amounts at IRS.gov as they change year to year.
Review: Tax Advantages of Health Savings Accounts
when you contribute
no tax on growth
no taxation on withdrawals (as long as they're used for health expenses)
Your insurance broker can help you choose the best plan option for your business and within your budget.
Who Doesn’t Like to Save Money?
It’s easy to set up HSAs. And they’re easy to implement.
You save money on both insurance premiums and on taxes.
Check out our blog on how HSAs are handled when it comes to payroll. We make everything easy.
If you want to check out a Health Savings Account for your business (or if you’re self-employed), give us a call today so we can review ways to save you money.