Health Savings Account ? need explanation confused

[s2kinteg916]

i have been looking at some options for health insurance but i found some info on health savings accounts. How does this benefit webmasters ? I looked up some info on google but i still dont understand the concept.

[Shawn]

Health insurance, self-employed, married = kills me.

[Cutter]

Basically you can put money away tax free to pay for future health expenses.

[Chris]

Health insurance, self-employed, married = kills me.
Wait till you have kids.... Not that I have kids yet... but then again thats why they pay us the big bucks huh?


Anyways... HSAs are only for people with high deductible health insurance. You must have insurance to have one, and you must have high deductible insurance. Meaning your deductible is atleast 1k. There are some other requirements but in general most plans with high deductibles will fit.

Now some insurance companies, or insurance agents, will try to sell you on a set package, but you can get them individually. My health insurance is from blue cross, and my HSA is from US Bank. Anyways, Blue Cross doesn't know nor need to know that I have an HSA.

You're allowed to contribute only a set amount to your HSA each year (kinda like an IRA) and that amount is deducted from your taxes regardless if you spend it. For a single person the amount is no more than your deductible. So if you have a $1k deductible you can contribute $1k a year.

You're allowed to use your HSA for more than just paying your deductible. For instance you can use it for dental appointments, even if you don't have dental insurance. Same with eye care. Any OTC medications can be bought with it. You can go to the store, buy a bottle of aspirin, and pay with your HSA if you want. There is a whole list of "qualifying medical expenses" the IRS publishes, its pretty lenient. Save your receipts of course. It's convenient too, my account comes with a checkbook, but also a check card, no special procedure for paying for something.

You can also withdraw money from your HSA for certain other reasons, I forget the list though, you may have to pay taxes if you do that though.

If you spend all 1k in the year, then next year you start from scratch. If, however, you're healthy all year then next year you could not contribute anything, or contribute 1k again and just have 2k saved up, or whatever. Also, it is a savings account, so you earn the piddly 1% or whatever interest.

Make sure to go over all this with your accountant.

[Shawn]

Having kids is scary. The health insurance, without maternity, is outrageous. With maternity (Blue Cross), it's an additional few hundred a month.

So, to just have a kid, it'd be a good $750 a month for just me and my wife's health insurance. I can't wait to see what the insurance would be like with a child.

[Sagewing]

The HSA is a sweet deal if you can afford to part with the cash. Best to max it out each year, then NOT use it. The money piles up and is tax deferred. You still have to pay tax on it when it's withdrawn, but the tax savings over time are very useful.

[demosfen]

Can't really say that it 'piles up' - you are not taking inflation into account

[s2kinteg916]

Thanks for your thorough explanation chris that helped out alot.

How do they bill u for your contribution ? for the health saving account ? Are u required each month to set aside a certain amount ?

As far as tax breaks as a self employed webmaster wouldnt this entitle you to 2 tax breaks ? one would be a health insurance can be written off as a expense and 2nd you would get a tax break on your contribution to your HSA.

[Sagewing]

Compared to getting taxed on it, it piles up by any standard. Tax deferrence is the best benefit there is.

[Giles]

Hah, all this talk about having kids. Makes me feel very young.

[Chris]

Thanks for your thorough explanation chris that helped out alot.

How do they bill u for your contribution ? for the health saving account ? Are u required each month to set aside a certain amount ?

As far as tax breaks as a self employed webmaster wouldnt this entitle you to 2 tax breaks ? one would be a health insurance can be written off as a expense and 2nd you would get a tax break on your contribution to your HSA.
Yes.

You just fund your account whenever and however you like... knowing only that there is a yearly limit to how much you can fund it.

[s2kinteg916]

So if you setup and HSA you can even make 0 contributions is that correct ?

When it comes to tax time do you get sent some information or anything or is it a matter of just filling out the information in the hsa form below.



Useful Links & Notes on the subject of HSA:

IRS Publication:
http://www.irs.gov/pub/irs-pdf/p502.pdf

HSA F.A.Q.'s
http://www.ustreas.gov/offices/public-affairs/hsa/faq_using.shtml

More Resources
http://www.wfhbs.com/shieldca/hsa.htm
https://www.mylifepath.com/bsc/findaplan/hsa/


Tax Filling Resources:
http://www.hsabank.com/accountholders/tax_resources.asp

HSA tax form
http://www.hsabank.com/forms/8889.pdf

"I have a very high deductible, is there a limit on how much I can contribute?

The most you can put into your account for 2005 is $2,650 if you have single coverage and $5,250 for a family. For 2006, these amounts are $2,700 and $5,450, respectively. These amounts will be increased for inflation in future years."

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