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LOS ANGELES () — Did you know health savings accounts can be a great way to save some money?
Health savings accounts can help cut taxes, cover health care costs and even help with retirement.
“I’ve really seen it to be a great strategy for a lot of clients. It’s sort of a no-brainer,” said Certified Public Accountant Bob Wheeler, who’s a big fan of HSAs, even in states like California where the tax breaks for state income do not apply.
The accounts allow individuals to deduct $4,400 a year for health care costs, and $8,750 a year for families. They are typically paired with high-deductible health plans, usually around $1,600 per person.
“You get these with a high-deductible health insurance policy, and so what you’re doing is you’re using your HAS to pay co-pays, pay the amounts that’s not covered by insurance,” Wheeler explained. “If you don’t use it, it just keeps growing, and so by the time you get to 59-and-a-half, if you’ve accumulated a bunch of money in your HSA, it basically turns into an IRA.”
Money in an HSA can earn interest, and some plans allow investments in stocks. However, those options can carry risk.
“When you’re investing, it’s high-risk, high rewards, so some HSAs only let you do mutual funds because it’s a little bit more conservative. Others will let you do whatever you want to do,” Wheeler said.
So if you qualify, HSAs can be a great way to lower your federal tax burden, save and invest.
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