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March 31, 2015 | Leave a Comment
If you are like me, you wait until the very last minute to do your taxes. Did you remember to maximize your Health Savings Account (H S A) options, assuming you have one in place? No extensions are allowed.
If you already maxed out your H S A, there’s nothing more you can do.
2014: Single Coverage $3,300, Family Coverage $6,550, additional catch up if 55 or older $1,000.
If you have not maxed out your contribution, consider:
1) This is the only tax vehicle in the country (probably the world) with triple tax savings: A tax write-off for the contribution, tax-deferred growth, and tax-free withdrawals for qualified expenses (unlike 401k, with is all taxed).
2) If you are unable to contribute the max, at least put enough away for all the qualified expenses for the year. Example: You paid $1,500 with after-tax money for your daughter’s braces in 2014. By putting $1,500 into your H S A, you will get a tax break of $375 (assuming a 25% tax bracket). So the braces only cost you $1,125.
How to do it.
1) Deposit a check for $1,500 into your H S A prior to April 15th.
2) Make sure the bank knows it is for 2014!
3) An updated 5498-SA will be prepared by your bank by May 31st, confirming that the deposit was for tax year 2014.
4) The $1,500 should go on line 2 of the 8889 H S A tax form. Contact your tax preparer.
5) Once the money has been deposited into the H S A account, you can withdraw the $1,500 to pay yourself back.
6) Always keep the receipts for all qualified expenses in case of an audit.
Doug Grant, Cornerstone Insurance Group, Benefits Consultant