Taxes Got You Down?
Posted: April 10, 2016
Taxes Got You Down? Maximize the Benefit of Your Health Savings Account
Whether you are getting ready to write a check to the IRS or to receive one as a refund, tax time in the U.S. is a great time to remember the value of your Health Savings Account. The flexibility of your H.S.A. includes the ability to make personal contributions up to the time you file your taxes for the applicable year*. Every dollar you contribute to your health savings account will reduce your taxable income and result in a reduction of your tax burden. By maximizing your H.S.A. funding you may find that you can add hundreds or thousands of dollars to your pocket by owing less to the IRS, possibly move into a lower tax bracket, and even increase the odds of receiving a refund.
In the case of my family, we found that due to a lack of coordination we had not contributed more than the $500 our employer added to our H.S.A. in 2015 leaving us with the possibility of adding another $6,150 from personal funds prior to our April 18th tax deadline. While that is a large amount to commit to an account that limits spending to qualifying expenses, we know that we had qualifying medical expenses such as: Lasik vision surgery, dental care, contacts, chiropractic visits, allergy shots, and more. We will be able to immediately withdraw the money to pay ourselves back for the expenses we incurred during 2015. That gives us the peace of mind that we will not tie up our personal savings indefinitely, but only long enough to reap the immediate tax savings of $1,500 or more (depending on where our tax bracket falls).
Is a last minute contribution right for your family? Take the following steps to consider your benefit:
Step 1: Confirm What You Were Eligible to Contribute in 2015
Step 2: Review Current Account Funding on your W-2 (Box 12 code W) or with your Health Savings Account administrator.
Step 3: Gather Distribution Records (reference Form 1099SA sent by your H.S.A. administrator in January).
Step 4: Draft Your “Qualifying Expense” Summary. Did any family member….
- Meet their medical deductible or maximum out-of-pocket?
- Have expenses that were out-of-network?
- Get contacts or glasses or Lasik surgery?
- Get braces or other dental care?
- Or have any other expense that might be qualified? See Publication 502 for guidance on qualified medical expenses.
Step 5: Evaluate the Benefit. If you are eligible to contribute additional funds to your H.S.A. and are eager to grow your health savings for the future , adding more before April 18th* may be an easy decision.
*Contact your H.S.A. administrator for contribution deadlines and procedures.
Where do you fall?
Health Savings Accounts aren’t for everyone and Innovative Insurance is here to help maximize your benefits whatever the program. Regardless of whether you have an account, plan to maximize your savings, or have a qualifying plan, I encourage you to take time to learn more about health savings accounts and how they can help you and your employer save. Contact us for a one-on-one consultation.
Here is a fun video overview of health savings accounts from one of our vendor partners, HealthEquity.