With health care costs skyrocketing, it has become even more challenging for small businesses and the self-employed to be able to afford quality health care. Healthcare expenses are increasing at a rate 5 times faster than most other living expenses.
One way to help make healthcare more affordable is to open a Health Savings Account (HSA). The account is paired with a high deductible health plan which makes it appealing to younger, healthier people who are looking to keep their health care premiums lower by selecting the high deductible insurance plans.
It is similar to an IRA savings account but for healthcare and not retirement. Armed with a little bit of information and a few tips, you will find that a self-employed hsa can be a great tool to assist you in making smart choices about your health insurance needs.
Tax Free is Always Good
The first big benefit to an HAS is that the contributions are tax free. The money that you invest in your account will be deducted from your paycheck pre tax so you get even more bang for each buck. Being self-employed, it is also important to note that employer contributions to an HSA account are exempt from payroll taxes.
So setting up additional contributions from your business is another way to save for your health care expenses and save money for your business. You also have the ability to enact a program which allows you, as the employer, to contribute to your other employees HSA accounts.
This is a great benefit to offer employees in the current competitive market. In addition, your payouts for qualified expenses are also tax free. Many HSA’s will provide account holders with a credit card to use their funds at just about any health care provider’s office. Others require you to pay for your care out of pocket and then submit receipts for reimbursement.
The term qualified expenses covers just about any medical or dental procedure that is needed other than elective things such as teeth whitening and cosmetic surgery. In addition, HAS funds cannot be used to pay for health insurance premiums or for nonprescription medication or supplements such as vitamins.
You Control Your HSA
The funds that you are contributing pre tax to your HSA are always in your control and are not sent to a health insurance company to be held on your behalf. It is very similar to setting up a separate bank account to deposit funds into to use for medical expenses. But in this case, the funds are deposited pretax. You also have the ability to save as much or as little as you would like to in the account.
There is a limit on the amount that you can save pre tax each year but you can contribute more to the account if you would like to. A single person can contribute up to $3,350 per year and a family and contribute up to $6,750 each year pretax. In addition, the account is tied to you as an individual and not your business so you can keep the account even if you close the business.
Grow Your Savings
HSA accounts are designed to be a long term tool for managing healthcare costs. For this reason, savings roll from year to year and have no maximum and never expire. So you can use the account to build a nice savings if you know that you will be facing a larger medical expense in a year or two.
This can be a great way to save pre tax for extensive dental work, a child’s braces or major surgery. An HSA account is also the perfect way to save a little each month to cover the cost of annual eye exams and prescription glasses.Interest
Because you are investing money in an HSA and not just putting it in the bank to save for your health related expenses, you will be growing the money with interest or dividends. This is a great bonus, especially because you don’t need to worry about managing the funds, monitoring the growth or paying fees for the investment service. And the growth in dividends and interest are also tax free or tax deferred.
Catch Up Bonus
As mentioned earlier, an HSA is much like an IRA but for healthcare expenses and not retirement. So just like having an IRA when you hit 55, you can make catch up contributions to your HSA account. At 55 the amount you can contribute to your account pre tax increases by $1,000 per year. You will be eligible to continue contributions at the increased amount until you have enrolled in Medicare.
This is a great way to know that you will have a nice savings account to use for medical expenses once you have retired. This can change an unexpected medical event or emergency from a financial downfall to simply an inconvenience but one that you can afford to pay for, like title loans with no job and title loans against cars.
That is a great way to remove the added stress of medical bills and to be able to simply focus on recovery and healing. In the event of a more serious health issue, you can also use HSA funds to pay for long term healthcare insurance.
Savings Are Always Good
Being self-employed adds enough stress and additional tasks to your life. Having a self-employed hsa is a great way to simplify how you will be able to pay for expected or unexpected medical expenses. Being able to contribute funds and draw out funds for medical care tax free is an added bonus.
Being tax free will increase your spending power on each dollar contributed by as much as 30%. And the added interest being tax free makes it an offer that is too good to pass up. Even if you decide to close your business, you can still maintain your HSA because it belongs to you and not your business. The account is just a smart way to save and grow a savings for short or long term medical care for the rest of your life.