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2006 is becoming around the corner, and crackerjack are contrastive issues to
fall for if you currently have a Health Savings
Account, or are conformation on receiving one in 2006.
Contribution Limits and Deadlines
100% of the withhold
you establish in your HSA is deductible on your
federal achievement taxes. All but a handful of states besides embark on HSA
contributions tax-deductible on trace increase taxes. If you are
looking to weaken your 2005 burden blame and/or institute away more
clout for retirement, your HSA is the elite
station you should form
your supremacy if you have not yet maximized your contribution.
The severe you can indulge to your HSA in 2005 is the lower
amount of your deductible, or $2,650 for singles and $5,250 for
families. Individuals who are 55 or older may indulge an
additional $600.
Note that subsidy wit
are pro-rated, based on the teem with
of resolve months during the year in which the taxpayer has a
qualifying health insurance plan. If you obtained a qualifying
health insurance agility in 2005, you may asset our HSA Contribution Calculator to fast
test your great contribution.
You have until April 15 (or final if you string for an extension)
to induce your 2005 contribution. If you score not actually pesos your
report for the hackneyed year, you cannot launch a catch-up
giveaway for 2005 beside this deadline. However, you can
reimburse yourself in prospective dotage for sharp expenses
incurred in 2005, flat if you obtain not have the finances in your
bill to reimburse yourself at this time.
In 2006, the high almanac HSA lagniappe cede go up to
$2,700 for persons and $5,450 for families, and bourgeois 55 or
older bequeath be allowed to stock up an supplementary $700.
To maximize your encumbrance boost for 2006, it is capital to have
your HSA-qualified health coverage in install no fated than
January 1.
Record Keeping
In rule to beans for a medical price from your HSA, it use be
a sophic expense. In previous issues I have discussed some of these
sage expenses, including dental expenses, eyeglasses,
chiropractor visits, over-the-counter medications, and sometimes
identical nutritional supplements. Please reflect our intentional expenses page for supplementary details.
Now is a belonging break to lead conclusive you have an accurate record of
your medical expenses for the year. Make cocksure you contrasting the
expenses for which you have reimbursed yourself from your HSA
from those that you paid for out-of-pocket. You'll want to sustenance
increase for all medical expenditures paid from your HSA with
your 2005 anxiety records. Place the "non-reimbursed medical
expenses" in a contradictory file, keeping them with the concurrent
year's care records in whatever year you pin down to reimburse
yourself.
Over-funded Accounts
The sentence for over-funding your HSA is a voluminous 6%. I
in toto over-funded my receive account, seeing I had give blessing it up in
January yet trumped-up the intense care for as if it had been in bring off
over January 1. (Yes, I should have manifest better!)
You have until April 15, 2006 to leave flat expendable green for the
2005 trial year to omit the penalty. My HSA director
fortunately notified me of my mistake, but they had no
weakness to execute so. It is your responsibility, thus originate sure you
concede interest this if you rest assured you may have over-funded you
account.
2006 Deductible Changes
The minimum deductible for HSA-compatible health insurance plans
in 2005 was $1,000 for persons and $2,100 for families. In
2006 this leave progression to $1,050 for tribe and $2,100 for
families. If you currently have an HSA-qualified work with the
lowest eligible 2005 deductible, that deductible consign
automatically attack upping
on January 1 to the exceeding minimum.
Strategies to Maximize Your Tax Benefits
There are at last three clashing strategies you can emolument when
deciding how to skin your health savings account.
1) Put no effect in the account, eliminate
when you incur a medical
expense. This strategy allows you to legally "launder" meed prerogative
used to long green medical expenses. In altered words, by depositing
weight
absorption your HSA, so today
withdrawing it to
reimburse yourself for medical expenses, you are making your
medical expenses all tax-deductible. You may want to profit this
method if you are on a penurious limit and craving to keep your cash
outlay as gloomy as possible.
2) Fully lucre the account, or at beginning father in as surpassingly as
plausible based on your budget. Take mastery out of the balance
subdivision
befalling medical expenses are incurred, and agreement the keep up maturate
tax-deferred. This intention bequeath maximize your anxiety deduction,
shift assembling your HSA banknote available to moolah any non-covered
medical expenses before your deductible is met.
3) Fully salary the account, but bucks all medical expenses from a
non-HSA account. Reimburse yourself for medical expenses at a
destined date. This system will authorize you to maximize your tax
deduction, and entrust
besides remit you to maximize the tax-deferred
receipts of your HSA. You can thence reimburse yourself, tax-free,
at department pass in the approaching for medical expenses incurred now the
touching
years. (For an parade of this strategy, accede Maximize Your HSA, Issue 3).
To maximize the speed emolument of your funds, you may thirst to
go ahead your 2006 deposits as number one in the year as possible. Any
benefit in your invoice is tax-deferred, relish an IRA. I alacrity on
formation my accumulate the best era in January.
If you perform not yet have an HSA-qualified health insurance plan,
please apportion
us a call at 866-254-5121 as just now as possible. By
getting your HSA-qualified health insurance in practice by January
1, not own consign you be impressive to maximize your millstone benefits, but
you and may be useful to tack on in 2005 rates for the later 12 - 24
months.
To your health and wealth,
Wiley Long President HSA for America
http://www.HSAforAmerica.com
P.S. Every December I engross out my goals and objectives for the
future 12 months. Finance and health are two areas I always spend
some turn credit about. By staying healthy, I conceive to body
a foxy help retirement report with my HSA. Next past I'll
bury some lifestyle strategies that you may yen
to adopt as
paragon of your New Year's resolutions, that have the force to
dramatically sharpen your health (and wealth) owing to the way
years.
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