Take Advantage of Your HSA

Health Savings Accounts are becoming more popular. They are usually part of a high deductible plan and are different from flex-spending.

They are triple-tax-advantaged where you pay no state or federal income tax on the money as it is deducted from your pay before taxes are calculated or

1. Contributions you make to a HSA are tax-deductible,
2. Contributions made by your employer are tax-free,
3. Interest accrued in the HSA is also tax-free,
and the accounts are “portable” meaning they stay with you even if you change jobs or leave the workforce.

Unlike flex-spending which must be used up annually (up to $500) or you lose it, HSA money can be carried forward indefinitely. This makes an HSA account another form of savings to use in retirement where healthcare can be a major expense.

Tax-free distributions from your HSA are made upon presenting receipts for qualifying health expenses like deductibles and co-pays. If you are able to cover these expenses out of pocket, you may hold on to the receipts and get a tax benefit in future years. Meantime, your money in the HSA grows tax-free.

Over time, If you are healthy and hardly draw from your HSA you could amass a sizable amount of money in your HSA to be used for future health expenses. There is no time limit on your receipts!

Be $ Smart - Save as much as you can in your HSA to take advantage of the triple tax exemptions. Use every tax break Uncle Sam offers. It leaves more money in your pocket!

With the New Year Comes a New Set of Numbers

Every January brings updates from the IRS and Social Security. It helps to know those numbers relative to your cash flow and tax situation. I'll mention a few for you to consider:

Social Security cost of living increase for 2016............$0
The government deemed there was no inflation in 2015, so no increase in monthly payouts.

Kiddie tax amount (children under 19 and dependent full time students under .............................................$1,050
This pertains to investment income not earned income.

Social Security earning base.......................$118,000
You must earn over $118,000 before your employer stops deducting SS taxes.

Social Security earnings limit......................$15,720
Maximum earned income under Normal Retirement Age 66.

Annual Gift Exclusion...............................$14,000
You may gift $14,000 to any number of individuals and not pay a gift tax.

401(k), SEP, TSA maximum contribution...............$18,000
Catch up for those over 50...........................$1,000
Make sure you contact HR to increase your contribution to reach the max. Contributions may lower your taxable income for the year.

Contribution limit for IRA's........................$5,500
Catch up for those over 50 .........................$1,000
If you turn 50 any time during 2016, you may contribute $6,500 max.
If you can't contribute the maximum, contribute something!

Health Savings Account contribution:
Single.....................................................$3,350
Family.....................................................$6,750
Catch up for those over 50 .........................$1,000
Since you are not required to spend down an HSA at the end of each year, this is a good way to grow retirement savings.

These are just a few numbers that may have meaning for you. Consult your tax person to determine which apply to you and to learn additional tax ways reduce your tax bill.

Be $ Smart - Take advantage of all opportunities to save on taxes, especially those that grow tax-deferred.