Maximizing Your HSA or FSA Account
Is Your Savings Account Saving You?
If your employer offers a Flexible Spending Account (FSA) or a Health Savings Account (HSA) it is usually a good idea to take full advantage of it if you are eligible.
Use prior or projected expenses to determine the amount you will need for the year. Your employer will take payroll deductions to fund your account. Some employers will add to what you contribute, so don’t over-fund your account. The monies must be used during the plan year. Plans can have a 2 ½ month grace period or a small carryover amount, not both. Any unused money is forfeited. So, get your reimbursement requests in soon! Plans cover medical and dental expenses that would qualify on your tax return. For details see IRS Pub 502 page 5.
An HSA is a trust account that requires a qualified HSA trustee to administer, usually a bank or insurance company. If you have a High Deductible Health Plan*, you may be eligible to open an HSA. Your contributions are reported on Form 8889. You will receive a 1099-SA from the trustee. HSA monies are used to reimburse you for medical & dental expenses, same as above. There are penalties for over-funding the account and you should be careful, particularly if you will be going on Medicare in the coming year.
This is a very brief outline of two health-related ways to save money on taxes, even if you do not reach the 7.5% AGI limit to claim medical expenses on your return. There are, of course, many more rules regarding each type of account. Your accountant or employer can be of further assistance for your specific situation.
High Deductible Health Plans*: 2016 Qualification (In-network expenses only)
|Self-only coverage||Family coverage|
|Minimum annual deductible||$1,300||$2,600|
|Maximum annual deductible and
other out-of-pocket expenses*
Source: IRS Pub 969