How to Make the Most of Your Health Savings Account
Open your account., Check the annual contribution limit each year., Alter your contribution amounts as you age., Set up payroll deductions., Keep track of any after-tax contributions.
Step-by-Step Guide
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Step 1: Open your account.
If you haven't already, find an HSA administrator so you can get your account started.
Many employers have a relationship with a specific bank or brokerage firm, but it isn't necessary for you to use that one.Check with your employer's human resources department to find out if they have a relationship with a particular HSA administrator, and the benefits of using that administrator over using another.
In some cases, you can only get employer contributions if you use their preferred administrator.
You also may want to shop around for a plan with low fees and other benefits that suit your needs.
Try searching on the website HSASearch.com. -
Step 2: Check the annual contribution limit each year.
The IRS sets a limit each year for the maximum amount that you can contribute to your HSA tax free.
Ideally, if you want to make the most of your health savings account, you'll contribute up to that limit.For example, for 2017 the maximum annual contribution limit is $3,400 for an individual account and $6,750 for a family account.
If you are over 55, you can contribute an additional $1,000 tax free.
Even if your account is not open for the full year, you still can contribute up to the maximum limit.
The contribution limit applies both to contributions you make as well as any contributions made by your employer, so make sure you know if your employer makes contributions and how much those are when you set up your contribution amounts. , If you can't or don't want to make the maximum allowed contribution, you still should try to contribute more while you are younger and have fewer responsibilities.Contributing more to your HSA while you are younger and don't have to tap into those funds as much means that money will be in your account longer and will be growing tax-free.
If you are older, have chronic medical conditions, or children who need extensive medical treatment, you may need to tap into the account more often or decrease your payments. , Most employers allow you to have HSA contributions deducted from your paycheck before taxes are taken out of your income, so you can receive the maximum tax benefits for your contributions.For some employers, you must set up payroll deductions to be eligible to receive any employer matching funds.
In addition to payroll deductions, you also can make direct contributions yourself.
These after-tax contributions are tax deductible provided they don't put you over the maximum annual contribution limit set by the IRS. , If you make any direct contributions to your HSA, you'll need to retain a copy of the transaction for your tax records so you can prove to the IRS that the money is deductible from your income.Contact your HSA administrator or read the welcome packet you received when you opened your account to find out how to make direct contributions.
If you make an electronic transfer from a checking or savings account to your HSA, print a copy of the account statement or transaction receipt for your tax records. -
Step 3: Alter your contribution amounts as you age.
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Step 4: Set up payroll deductions.
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Step 5: Keep track of any after-tax contributions.
Detailed Guide
If you haven't already, find an HSA administrator so you can get your account started.
Many employers have a relationship with a specific bank or brokerage firm, but it isn't necessary for you to use that one.Check with your employer's human resources department to find out if they have a relationship with a particular HSA administrator, and the benefits of using that administrator over using another.
In some cases, you can only get employer contributions if you use their preferred administrator.
You also may want to shop around for a plan with low fees and other benefits that suit your needs.
Try searching on the website HSASearch.com.
The IRS sets a limit each year for the maximum amount that you can contribute to your HSA tax free.
Ideally, if you want to make the most of your health savings account, you'll contribute up to that limit.For example, for 2017 the maximum annual contribution limit is $3,400 for an individual account and $6,750 for a family account.
If you are over 55, you can contribute an additional $1,000 tax free.
Even if your account is not open for the full year, you still can contribute up to the maximum limit.
The contribution limit applies both to contributions you make as well as any contributions made by your employer, so make sure you know if your employer makes contributions and how much those are when you set up your contribution amounts. , If you can't or don't want to make the maximum allowed contribution, you still should try to contribute more while you are younger and have fewer responsibilities.Contributing more to your HSA while you are younger and don't have to tap into those funds as much means that money will be in your account longer and will be growing tax-free.
If you are older, have chronic medical conditions, or children who need extensive medical treatment, you may need to tap into the account more often or decrease your payments. , Most employers allow you to have HSA contributions deducted from your paycheck before taxes are taken out of your income, so you can receive the maximum tax benefits for your contributions.For some employers, you must set up payroll deductions to be eligible to receive any employer matching funds.
In addition to payroll deductions, you also can make direct contributions yourself.
These after-tax contributions are tax deductible provided they don't put you over the maximum annual contribution limit set by the IRS. , If you make any direct contributions to your HSA, you'll need to retain a copy of the transaction for your tax records so you can prove to the IRS that the money is deductible from your income.Contact your HSA administrator or read the welcome packet you received when you opened your account to find out how to make direct contributions.
If you make an electronic transfer from a checking or savings account to your HSA, print a copy of the account statement or transaction receipt for your tax records.
About the Author
Gary Thompson
A passionate writer with expertise in lifestyle topics. Loves sharing practical knowledge.
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