Tips for Making HSA Contributions
Most of us like saving money, and when it comes to health savings, a Health Savings Account (HSA) has many financial benefits. HSA contributions are tax-deductible, the money in those accounts grows at a tax-free rate, and qualified purchases made with these funds are tax-free.
According to HSA administrators Clarity Benefit Solutions, HSAs can be even more beneficial when employees make the most of every dollar they contribute. Here are tips for maximizing the impact of your HSA dollars.
Contribute the maximum allowed, if you’re able to
If your primary goal for your HSA is for savings, or because you anticipate a lot of out-of-pocket medical expenses in the future, then it is smart to contribute the maximum amount allowed each year. For individuals, the maximum contribution is $3,500, and for families, it is $7,000. If you are over 55 years old, you can make an additional catch-up contribution of $1,000 per year to increase your balance further. This allows you to maximize the amount of your money that is growing tax-free. If the maximum contribution is not reasonable for you, start with a lower amount and slowly increase as your income allows.
Focus on eligible expenses
Traditionally, people use HSA money for things like deductibles, co-payments, prescriptions, vision and dental expenses. However, there are other eligible items that you can purchase tax-free using HSA dollars that you might already be purchasing and paying taxes on. Some of these items include asthma equipment, crutches, first aid kits, shoe insoles, thermometers and vitamins.
Invest for the future
You can invest a portion of your HSA funds in mutual funds to accumulate tax-free growth. If you have a higher income, it might be a good idea to use non-HSA money to pay for manageable healthcare expenses so that you can invest more of your HSA in a safe, tax-free environment.
Source: Clarity Benefit Solutions
Reprinted with permission from RISMedia. ©2019. All rights reserved.
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