Health Savings Accounts are used by some tax payers as a way to reduce their tax liability. If you are eligible, you have until April 18th to set up and fund a Health Savings Account for the 2016 tax year. To be eligible, you must have had a high deductible health plan since December 1, 2016 or earlier, and no other health coverage including Medicare. You also cannot be claimed as a dependent on someone else’s 2016 tax return.
How can contributing to an HSA reduce tax liability? A contribution will adjust your gross income dollar-for-dollar, which is particularly worthwhile if you are trying to move to a lower tax bracket or qualify for any lower-income incentives. For 2016, you can contribute up to $3,350 for individuals or $6,750 for families. For those individuals aged 55 or older and eligible at the end of the tax year, the contribution limit is increased by an additional $1,000.
Even if you are the type of person who rarely incurs health expenses, HSAs are a fantastic vehicle for boosting retirement savings. More importantly, they can be a great way to hedge against the ever-increasing costs of healthcare.
Please consult a tax adviser for your specific tax situation.
By Adam Lucas Adam Lucas holds a Finance degree and an MBA from the University of Kentucky. His work has appeared in many major outlets including Yahoo, AARP.org, and GoBankingRates.com.
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