More on Health Savings Account from Kiplinger

In late December I wrote a piece on how to use health savings account (HSA) to save money on health care in the future. Today, an article appeared on Kiplinger’s Personal Finance website further illustrated the idea of using HSA as a financial planning tool rather than simply a health care account. According to the article,

Now, people with family plans can contribute up to $5,650 for the year, regardless of their deductible (as long as they have a deductible of at least $2,200, which they need to qualify for an HSA). Individuals can contribute up to $2,850 but need only a deductible of $1,100 to qualify for an HSA.

The changes were due to the new law, “Tax Relief and Health Care Act of 2006,” which was signed on December 20, 2006. As for the tax benefits of using an HSA, the article says

The longer you can keep the money in the HSA, the bigger the tax benefits you can reap. You can contribute pre-tax money to the account, where it grows tax deferred and can then be used tax free for medical expenses – a triple tax benefit that’s tough to find anywhere else. The more time the money remains in the account, the greater benefit you’ll get from the tax-free earnings.

To be eligible to contribute to a HSA, however, you have to have a high deductible health insurance plan. Check out the Treasury Department website for more details about the rules of getting a HSA.

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