What are the benefits of a health savings account?
One of the greatest benefits of being covered under a high-deductible health plan (HDHP) is generally the ability to open a health savings account (HSA) and receive tax-preferred treatment on money saved for medical expenses. Specifically, HSAs provide a triple tax benefit: tax-deductible contributions, tax-free earnings, and tax-free withdrawals. Being aware of the tax-saving opportunities of an HSA will give you a better understanding of how to take full advantage.
An HSA is used to save money to cover out-of-pocket medical expenses not covered by your health insurance plan. Many banks and brokerage firms offer HSA plans with various interest- and dividend-earning options.
One benefit of having an HSA is that your contributions are tax deductible. Although there are annual limits to the amount that can be contributed, your HSA contributions can be claimed as a deduction on your tax return even if you do not itemize your deductions.
For 2016, if you have individual health coverage, the maximum tax-deductible contribution remains the same as last year at $3,350, and for family coverage the contribution limit increased to $6,750. For those 55 and older, the additional contribution limit remains at $1,000.