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Medical Expenses and Income Tax When it comes to medical expenses and income taxes, there are a number of ways to save significant amounts of money. The government currently offers a number of savings accounts designed specifically to provide individuals and families with tax-exempt money for their medical bills. The most recent and popular of these accounts is the health savings account, or HSA. Medical Expenses and Income Tax: Advantages of the HSA HSAs from take care are an alternative to more traditional health plans. They allow individuals to place a certain amount of tax-exempt money into a savings account that they will be able to draw from for their medical expenses. Almost anyone can qualify for an HSA; the only real requirement is the purchase of a high deductible health plan. There are limits however on the amount of money that can be placed into these accounts. During the calendar year 2006, the maximums are $2,700 for individuals and $5,450 for families ($2,850 for individuals and $5,560 for families in 2007). Nevertheless, the tax advantages of using an HSA are quite appealing. The money that is deducted from each paycheck towards the account is tax-exempt, meaning that only the remaining balance can be taxed. This provides individuals with substantial tax savings every year. In addition to the tax advantages, HSAs also provide greater freedom of choice over medical expenses. The money in the HSA can be drawn directly via check or debit card to pay medical bills. Since it is essentially a savings account, individuals can therefore decide what medical expenses to spend their money on and in what quantity. |
Additional Topics Consumer-Directed Health Plans Consumer-Driven Health Accounts Dependent Care Flexible Spending Accounts Flexible Health Spending Accounts Flexible Medical Expense Accounts Health Care Flexible Spending Accounts Health Reimbursement Arrangements IRS Section 125 Cafeteria Plans Plan for Medical that Health Insurance Doesn't Cover Save 25% to 40% on Health Expenses Save on Co-Pays and Over-the-Counter Medications Save on LASIK and Orthodontic Costs Section 125 Plan Administration |
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