Tax Deductible Health Savings Account

If you have a high-deductible health insurance plan, youNow it is January 1st, 2009, and I still have this $850 left
should be eligible for a tax deductible health savingsin my account. Any remaining balance rolls over. This is
account. What this means is that you can set up ajust like a regular savings account; its not like a "Flexible
savings account (yes, you get paid interest) to depositHealth Spending Account" where the unused balance
money into each year. Since I am single, I can depositat the end of the year is lost. So I have this $850 still in
up to $2,800 per year before tax. (If you have a family,my account on January 1. So I decide that I want to
I believe this limit is raised to $5,600 per year). Thismake the maximum tax-deductible contribution again,
means that I can put $2,800 into my health savingsand put another $2800 into the account. Again, I get to
account and write that off. I don't even need to itemizewrite that $2800 off when I do my taxes, and now I
for that year if I want to take the deduction. Thehave a whole $3650 in my Health Savings account
money sits in the account and earns interest tax-freethat is just sitting around earning interest.
until you need to use it for related medical expenses.Remember that you don't have to choose to throw in
Here is an example of how this works. I start my higha whole $2800 all at once. You can make as many
deductible health insurance and tax deductible healthdeposits as you want into your account. At the end of
savings account on January first, 2008. I start the yearthe year you total them all up, and you can write off
off by depositing the maximum $2800 into thethe sum of them as long as it is not over the legal limit
account. Throughout the year, I end up incurring $2000(for 2008, the limit is $2800 for single people and
worth of medical expenses which I use my tax$5600 for families).
deductible health savings account to pay for. At theYou can use the money in your tax deductible health
end of the year, I have $850 left in the account (Isavings account for a wide range of health purchases.
made a few extra bucks because of the interest).Not only can you use it to cover any medical bills that
When it comes time to file my taxes, let's pretend Iare not covered by your insurance (your deductible),
made $30,000 in wages that year. Well, since I madeyou can use it to buy over-the-counter medicine, even
that $2800 contribution to my tax deductible healthdiapers!
savings account, the government is only going to taxIf you don't have medical insurance, start looking online
me on $27,200 rather than the full $30,000.for something today. My plan is only $50 a month and
Ok, so I saved a bunch of money on my 2008 taxes,has already saved me well over ten thousand dollars
and I have also made a few bucks in interest for myin medical bills, not to mention having the tax benefits
tax deductible health savings account along the way.of the tax deductible health savings account.