Tag: taxes

Understanding Health Savings Accounts

Navigating health insurance plans can be confusing. One health insurance product that’s relatively easy to understand is a health savings account, or HSA. This type of account can help account holders save money on the costs associated with their healthcare.

What is an HSA?

HSAs are like any other savings account, except they can be used for medical, vision and dental expenses. HSAs are tax-advantaged, meaning that income can be deposited into an HSA before it is taxed. HSAs can only be opened and used in conjunction with a high-deductible health insurance plan, or those with a deductible of at least $1,300 for an individual or $2,600 for a family.

HSA details and eligibility requirements

Although HSAs have contribution limits, they’re advantageous in that the savings accumulated can be used to pay for noncovered, qualified medical expenses, such as copays, vision and dental care and even deductibles.

HSAs may be established through an employer-sponsored insurance plan or through a bank or other financial institution. To qualify, a person must be under the age of 65 and have a high-deducible health insurance plan.

What are the advantages and disadvantages of HSAs?

There are advantages and disadvantages to HSAs. HSA account holders can control how their saved money is spent, and there’s no risk of losing the money at the end of the year because it rolls over. Taxes are not paid on money going into the HSA. In addition, employers can contribute to HSAs, and account holders do not lose their balances when they change jobs.

Disadvantages include the challenge of setting aside money to put into the HSA, especially if finances are tight. One who has certain medical situations that are urgent may find that budgeting for an HSA is impractical.

A retirement saving vehicle

In addition to the other benefits mentioned, HSAs can be used as a way to invest in retirement. The resource NerdWallet, which offers financial tools and objective advice to help people understand their options and make the best possible decisions, says an HSA is a good retirement savings option, especially for high-income earners who can’t make deductible contributions to a traditional IRA or any contributions to a Roth IRA. HSAs can help offset healthcare costs and even help with long-term financial planning.

This article sponsored by:

Get a Head-Start on Tax Season

While the deadline to file returns may be several months away, getting a head-start allows men and women the chance to organize their tax documents so they aren’t racing against a deadline come April. The following are a handful of ways to start preparing for your returns now.

The dawn of a new calendar year often marks the end of the sometimes hectic holiday season. This time of year marks a return to normalcy for many families, as the kids go back to school and parents return to work.

The beginning of January also serves as a great time to start preparing for tax season. While the deadline to file returns may be several months away, getting a head-start allows men and women the chance to organize their tax documents so they aren’t racing against a deadline come April.

Ways to Start Preparing for your Returns Now

  • Find last year’s return. You will need information from last year’s return in order to file this year, so find last year’s return and print it out if you plan to hire a professional to work on your return.
  • Gather dependents’ information. While you might know your own Social Security number by heart, if you have dependents, you’re going to need their information as well. New parents or adults who started serving as their elderly parents’ primary caretakers over the last year will need their kids’ and their folks’ social security numbers. If you do not have these numbers upon filing, your return will likely be delayed and you might even be denied potentially substantial tax credits.
  • Gather your year-end financial statements. If you spent the last year investing, then you will have to pay taxes on any interest earned. Interest earned on the majority of savings accounts is also taxable, so gather all of your year-end financial statements from your assorted accounts in one place. Doing so will make filing your return, whether you do it yourself or work with a professional, go more quickly.
  • Speak with your mortgage lender. Homeowners should receive forms documenting their mortgage interest payments for the last year, as the money paid in interest on your home or homes is tax deductible. If these forms are not received in a timely manner, speak with your lender. You might even be able to download them from your lender’s secure website.
  • Make a list of your charitable contributions. Charitable contributions, no matter how small, are tax deductible. While it’s easiest to maintain a list of all charitable donations you make as the year goes on, if you have not done that, then you can make one now. Look for receipts of all contributions, contacting any charities you donated to if you misplaced any receipts.
  • Book an appointment with your tax preparation specialist now. As April 15 draws closer, tax preparers’ schedules get busier and busier. The earlier you book your appointment, the more likely you are to get a favorable time for that meeting. In addition, if you have gathered all of the information you need by early February, then booking your appointment early means you can file earlier and receive any return you might be eligible for that much quicker.

This article sponsored by: