Borgida CPAs

    Manchester, CT 860.646.2465 • Office Hours Monday–Thursday: 8:30am–5:00pm

    Niantic, CT 860.739.5459 • Storrs, CT 860.429.7885 • Hours vary. Please call


    • Home
    • About Us
      • Peter Bartolotta, CPA
      • Thomas Scanlon, CPA, CFP®
      • Aaron Johnson, CPA
      • The Staff
    • Small Business Taxes
    • Tax & Accounting Services
      • Accounting
      • Tax Planning and Preparation
      • Estate and Trust Services
      • Resources
    • Contact Us
      • Manchester
      • Storrs
      • Niantic
    • Blog
      • Estate Planning
      • Events
      • Firm News
      • Small Business
      • Tax News
    • Client Portal Login
    Home › Small Business › 3 Reasons to Use a HSA to Save Money

    3 Reasons to Use a HSA to Save Money

    Posted in Small Business, Tax News on April 16, 2021

    3 fingers held upHealth Savings Accounts (HSAs) are a tax efficient way to pay for health care.

     

    To establish a HSA you need to be eligible.  Taxpayers are eligible if:

    • They are not on Medicare and;
    • They are enrolled in a High Deductible Health Plan (HDHP)

     

     

    For 2021, a High Deductible Health Plan is one where the minimum deductible is $1,400 for a single individual and $2,800 for a family.  Additionally, the maximum Out-of- Pocket limits (deductibles, co-payments and other amounts, but not premiums) is $7,000 for a single individual and $14,000 for a family.

     

    1. HSA contributions are tax deductible:

    For 2021, a single individual can contribute up to $3,600 and a family can contribute up to $7,200.  Additionally, taxpayers age 55 and older can make a so-called “Catch-Up contribution” annually of $1,000.

     

    This deduction is a “Above-the-line Deduction” and therefore is allowed in calculating Adjusted Gross Income (AGI).  The additional benefit is that this deduction is also deductible for State of Connecticut income tax as AGI is the starting point for the tax calculation.

     

    Contributions have the same due date as IRA’s.  A 2020 HSA contribution needs to be funded by May 17, 2021. The 2020 limits are $3,550 for a single individual and $7,100 for a family.

     

    2. If funds in the HSA are invested, any growth (may be) tax-free.

    HSA administrator will offer investment options for HSA accounts. These tend to be mutual funds. Qualifying distributions will be tax-free. Non-qualifying distributions will be tax-deferred.

     

    3. Withdrawals to pay qualified medical expenses are tax-free.

    Caution needs to be exercised when taking withdraws to pay for medical expenses, however, as non-qualified distributions are not tax-free.  Additionally, in addition to the income tax, there is a 20% penalty if the distribution is made before age 65.

     

    For folks that have resources to pay for medical expenses from another source, they should consider using those funds to pay their medical expenses. This would allow their HSA to grow over time. If you are in a position to do this, maintain the receipts for these medical bills. You can reimburse yourself at some point in the future.  Any expense that was incurred after the establishment of the HSA can be reimbursed.

    About Tom Scanlon

    Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has  recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.

    ‹ Things You NEED to Know About Filing Your 2020 Income Tax Returns
    5 Reasons Taxpayers over Age 70 1/2 Should Make a Charitable Donation From Their IRA ›
    Tagged with: CT Income Tax, HD HP, Health Savings Account, High Deductible Health Plan, HSA, Medical Deduction, Medicare
    Latest News
    • IRS Increases Mileage Rate: effective 7/1/22
    • Team BORGIDA CARES! Raises $3,168 For The American Cancer Society
    • Child Tax Rebate Program – MUST APPLY BY 7/31/22
    • Relay For Life 2022 – How can YOU help? There’s Lots of Ways…
    • 4 Reasons NOT to Wait for Your K-1
    Categories
    • Estate Planning
    • Events
    • Firm News
    • Small Business
    • Tax News
    Archives
    • 2022
    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2014
    • 2013
    • 2012
    • 2011
    • 2010
    • 2009

    Borgida & Company, P.C. | Manchester, CT 860.646.2465 • Niantic, CT 860.739.5459 • Storrs, CT 860.429.7885

    Search

    Links

    • American Institute of Certified Public Accountants
    • Connecticut Department of Revenue Services
    • Connecticut Society of CPAs
    • Financial Planning Association of Connecticut
    • Internal Revenue Service

    Latest News

    • IRS Increases Mileage Rate: effective 7/1/22
    • Team BORGIDA CARES! Raises $3,168 For The American Cancer Society
    • Child Tax Rebate Program – MUST APPLY BY 7/31/22
    • Relay For Life 2022 – How can YOU help? There’s Lots of Ways…
    • 4 Reasons NOT to Wait for Your K-1

    Categories

    • Estate Planning
    • Events
    • Firm News
    • Small Business
    • Tax News

     

    blogarama - the blog directory
    About Us

    Get Free Tax Tips

    Please enter your email address and first name.

    Select list(s) to subscribe to


    By submitting this form, you are consenting to receive marketing emails from: Borgida & Company, 360 East Center Street, Manchester, CT, 06040, http://www.borgidacpas.com. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact
    • Home
    • Website Accessibility
    • Contact Us
    • Sitemap
    © 2022 Borgida CPAs | All rights reserved.
    ↑
    Web design: iGRAFIX creative solutions