Health Savings Account HSA

 

A Health Savings Account HSA is a tax-exempt trust or custodial account set up with a qualified HSA trustee (a qualified HSA trustee can be a bank, and insurance company, or anyone already approved by the IRS to be a trustee of IRAs or Archer MSAs) in which money is saved exclusively for future medical expenses. This account must be used in conjunction with a High Deductible Health Plan (HDHP).

HSA LImits

	Contribution limit		HDHP min deductible		Maximum OOP
Year	Self-only	Family	Self-only	Family	Self-only	Family	Ref
2011	$3,050	$6,150	$1,200	$2,400	$5,950	$11,900	RP-10-22
2010	3,050	6,150	1,200	2,400	5,950	11,900	RP-09-29
2009	3,000	5,950	1,150	2,300	5,800	11,600	RP-08-29
2008	2,900	5,800	1,100	2,200	5,600	11,200	RP-07-36
2007	2,850	5,650	1,100	2,200	5,500	11,000	RP-06-53
2006*	2,700	5,450	1,050	2,100	5,250	10,500	RP-05-70
2005*	2,650	5,250	1,000	2,000	5,100	10,200	RP-04-71

*Until the Tax Relief and Health Care Act of 2006 (HR 6111), PL-109-432, as implemented through Rev. Proc. 2007-36, the actual contribution limit was the lower of the actual deductible or the amount shown above, and the limit applied monthly at 1/2 of the annual limit.
What are the Benefits of a Health Savings Account?

• You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040.
• Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
• The contributions remain in your account from year to year until you use them.
• The interest or other earnings on the assets in the account are tax free.
• Distributions may be tax free if you pay qualified medical expenses.
• An HSA is "portable" so it stays with you if you change employers or leave the work force.

Qualifying for a Health Savings Account
To be an eligible individual and qualify for an HSA, you must meet the following requirements.

• You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
• You have no other health coverage except what is permitted under Other health coverage, later.
• You are not enrolled in Medicare.
• You cannot be claimed as a dependent on someone else's tax return.

High Deductible Health Plan (HDHP)
A High Deductible Health Plan has:

• A higher annual deductible than typical health plans, and
• A maximum limit on the sum of the deductible and the annual out-of-pocket medical expenses that must be paid for covered expenses. Out-of-pocket expenses include copayments and other amounts, but do not include premiums.

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Get Credit for Your Retirement Savings Contributions

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You may be eligible for a tax credit if you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement.  Here are six things the IRS wants you to know about the Savers Credit:
1. Income Limits The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:

• Single, married filing separately, or qualifying widow(er), with income up to $27,750
• Head of Household with income up to $41,625
• Married Filing Jointly, with incomes up to $55,500

2. Eligibility requirements To be eligible for the credit you must have been born before January 2, 1992, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person's return.
3. Credit amount If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
4. Distributions When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date - including extensions - for filing the return for the credit year.
5. Other tax benefits The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.
6. Forms to use To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.