By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Idaho
What is a “Health Savings Account” and why would you want one? [1]
HSAs are tax-advantaged individual-owned accounts that let you save pre-tax dollars for future“qualified medical expenses.” You can invest the funds in interest bearing accounts or other investments such as mutual funds tax-free.
There is no tax for the HSA funds going into an account and the funds grow tax-free. There is no tax on withdrawals that are used to pay eligible health expenses.
Many people have high deductible health insurance plans. A family may have a $5,000 deductible per family and $2500 per individual. The problem then becomes how to pay the deductible portion when health expenses occur.
What are some allowed “qualified medical expenses”?
Alcoholism, ambulance, artificial teeth, capital expenses [ramp for your home, support bars, modify hardware on doors, and more], eye exam, eyeglasses, chiropractor contact lenses, hearing aids, long term care services, long term care insurance contract, nursing services, oxygen, transportation for medical services, weight-loss programs and wheelchairs. See IRS Publication 502.
Some of the tax savings for an HSA are:
- No taxes paid on the funds going into an HSA account
- HSA funds are not subject to income or capital gains taxes.
- HSA funds may be used to reimburse an individual for “qualified medical expenses” that were paid by that individual from out-of-pocket funds, so long as the individual can show receipts, even if it is years later.
If you have a Health Savings Account as part of your personal safety net and your estate plan, it can be used in more ways to help than you imagined.
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If you would like to speak with me about your own estate planning goals, don’t procrastinate! Call for an appointment (208-344-0375) to begin an estate plan to meet your goals. This FREE 30-minute consultation [a $225 value] is available if we are the right law firm to help you.
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[1] “Tax Secrets of Health Savings Accounts,” Laura Saunders, Wall Street Journal, September 30, 2022
