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Health Savings Accounts–as tax time comes, here’s one more avenue

03-22-2009 by Colleen King

Health Savings Accounts (HSAs) are a great way to pay for your health care when you have a qualified high deductible health plan. One big benefit is that any money you deposit into your HSA is deductible on your federal tax return. It’s also deductible on some states’ returns (but not in California, just yet.) HSA eligible plans can be found in individual health and group health insurance offerings.

If you have an HSA, but you didn’t bother to put much in it last year, you can still drop some money in before filing your taxes! If your tax guy calls you like my guy David does, and says ‘hey, can you find a couple more bucks to stash somewhere soon?’ then you have another place to legitimately obtain a deduction.

The catch is that you have to have opened the HSA in 2008, you can’t open it now and try to take the deduction for 2008. If you opened an HSA in 2008 but didn’t fully fund it, and you don’t have some other tax deductible place to put it (or you maxed them all out) remember that the upper limit for 2008 for an individual plan is $2900 and for a family, $5800. DON’T exceed the limits. HSA contributions and disbursements are reported to the Feds.

So if you didn’t open it last year, are bummed that you are missing out on this easy, above the line deduction and you are eligible, open it now. Get a head start on your 2009 deductions. Depending on where you open it, you don’t have to deposit a fortune. I don’t claim to be a tax expert, just an expert tax payer as one now defunct radio talk show host used to say. So consult your tax adviser to see if this is a good way for you to handle this situation.

And, best of all, at the end of the year it’s not ‘use it or lose it’–it rolls over.

Be well!


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