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HSA Accounts Under Obamacare

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Keep in mind...
  • The contribution limit for a single person is currently set at $3,400. Individuals over the age of 55 may contribute an additional $1,000
  • The contribution limit for a family is currently $6,750 and the additional $1,000 still applies to a wage earner over the age of 55
  • Families have a minimum deductible of $2,600 and maximum out of pocket expenses of $13,100
  • Single currently have a minimum deductible of $1,300 and a maximum out of pocket expense of $6,550
  • Health Savings Accounts are not classified as use it or lose it. You are free to keep the money or invest it if you so choose
A Health Savings Account (HSA) is designed to be a tax savings mechanism to promote individuals saving for necessary medical expenses by giving them a tax break at the time that a contribution is made. Individuals contributing to an HSA are able to use that money to pay for certain medical expenses on a tax-free basis. Such money can be used to pay for a variety of out of pocket medical related costs associated with medical, vision, and dental needs.

It is important to note that the money in an HSA cannot be used to pay premiums on a health insurance policy. As such, they are only permitted to be used under Obamacare with certain High Deductible Health Plans that end up counting as minimum essential coverage under the Affordable Care Act.

Remember that not every plan with a high deductible will qualify to be used with an HSA, so you will want to use this information as you compare policies and before you actually sign for your annual healthy insurance policy.

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There Are Limits to Health Savings Accounts

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Deductible and out of pocket limits can change every year, so you will want to check to confirm if you are contributing the proper amounts. Keep in mind that the limits for families is different than for singles and that individuals aged over typically get an extra $1,000 added to their contribution limit. Here are some bullet points that will help readers better understand the limits associated with Health Savings Accounts under Obamacare.

  • Funding an HSA does not automatically give you your deduction. To do that, you will want to properly fill out Form 8889 in order to demonstrate that you have funded your medical savings account in order to claim the right deduction.
  • You will want to keep in mind that contributing to an HSA can affect your overall Adjusted Gross Income, but this can be paired with a High Deductible Plan to increase the cost assistance that you receive under Obamacare. This is done because your overall MAGI income will effectively lower.
  • While the maximum requirements for high deductible plans do not change yearly under Obamacare, out of pocket maximums do. You will want to be aware of this.
  • Currently, a Health Savings Account can be paired with any plan under Obamacare that has an annual deductible in excess of $1,300 for individual coverage and $2,600 for families. This has not changed in several years.
  • The current HSA contribution limits are $3,400 for a single and $6,750 for a family. Remember that people over 55 years of age may contribute an extra $1,000 if they choose to.

How HSAs Work With High Deductible Plans

Remember that Health Savings Accounts can only be paired with insurance policies that are a part of a High Deductible Plan.

In other words, as long as you subscribe to a policy that has a High Deductible Plan, you will be able to contribute tax advantage money into the account up to the annual limit.

However, it is important to note that you will be forced to stop contributing to the HSA if you give up the high deductible plan. You will, however, be permitted to use the money that you have contributed up to that point.

Benefits of Having an HSA Under Obamacare

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There are actually quite a few advantages to maintaining a Health Savings Account under Obamacare if you qualify. Here are five of the more notable benefits:

  • Contributing to a Health Savings Account can effectively lower your tax bracket, meaning that some individuals will pay up to 10 percent less on their tax bill each year when maxing out their contributions.
  • An HSA can end up lowering your MAGI. This means that some individuals and families will actually qualify for more tax credits each year. It is also possible to receive more cost-sharing subsidies on a Silver plan simply by funding an HSA each year.
  • You are to pay out-of-pocket medical expenses on a tax-free basis when you have a Health Savings Account. The deductible on many plans equals the maximum contribution level on an HSA, meaning that you will pay your part of health insurance related costs on a tax-free basis as well. This is the cheapest way to pay for your health coverage in the long run.
  • If you need access to your HSA money for a purpose that is not related to healthcare, an early withdrawal can be made for a 20 percent penalty. Alternatively, the money can be rolled over into your own retirement account, and you can withdraw the money at the age of 65 without incurring a penalty.
  • You never lose your HSA money. You can choose to keep it, invest the money, or roll it over into another savings account. There are options as well. Basically, even if you stop contributing the HSA, you will keep the money.

In Conclusion…

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Under Obamacare, Health Savings Accounts continue to be a real winner. As long as you have a qualified High Deductible Plan to pair it with, there really are no disadvantages to contributing money the HSA. Even if you are a generally healthy individual, you never know when you need to pay for medical expenses.

It is important to make the best use of your health insurance policy, so using money tax-free is the way to go. Just keep in mind the annual contribution limits and maintain a High Deductible Plan.

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