April 13, 2017
April in the D!
It is April in the D! Unfortunately it is not the April in the D we have become accustomed to. The Red Wings missed the playoffs for the first time in 25 years and the playoff hopes for the Pistons quickly vanished. The first game of the year for the Tigers was rained out in Chicago and we experienced yet another “spring” snowfall. However, there is one thing remains constant in April – no not the Masters – taxes! Are you taking advantage of every vehicle available to you to reduce your annual tax bill?
As Wayne eluded to in his previous blog, we provide comprehensive tax planning to our clients. One of the most overlooked vehicles across the industry continues to be the Health Savings Account (HSA). An IRA may make sense, but the HSA is that new shiny vehicle in the dealer’s parking lot. I do not know many individuals or families that do not incur medical expenses annually. So, if you are like the majority of American families the HSA may be ideal for you.
1. What is the HSA?
The HSA is a qualified trust or custodial account administered by a qualified trustee, which can be a bank, insurance company, or another IRS approved entity.
2. Why is the HSA so powerful?
The HSA is triple tax differed. Yes, you read that correctly, triple tax deferred. Any dollars in your HSA are yours and will continue to rollover annually. HSA’s are portable if you change employers. In addition, distributions for non-medical expenses can be taken penalty free at the age of 65.
3. How can it be used?
To reduce income taxes, as an investment vehicle, and as medical expense account.
4. What are the contribution rules?
You must be enrolled in a high deductible medical plan. For 2017, the minimum annual deductible is $2,600 and the maximum annual out of pocket expense limit is $13,100. If you have a high deductible medical plan, your contributions will be tax deductible, investment earnings will be tax free, and qualified withdrawals of funds will be tax-free. However, you cannot contribute to an HSA if you do not have a high deductible medical plan.
Before you make that IRA contribution, it may make sense to consider an HSA contribution. HSA’s offer several benefits that are not available to you inside of an IRA. It may be time to consider HSA contributions, but we recommend speaking to a Gainplan professional before altering your savings strategy.
Happy tax season, go Tigers!
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