April in the D and Tax Strategies

It’s April in Detroit, and unfortunately, this month hasn’t been the one we’ve grown used to. The Red Wings missed the playoffs for the first time in 25 years, and the Pistons’ playoff hopes quickly vanished. The Tigers’ first game of the year was rained out in Chicago, and we even got another “spring” snowfall. Despite all that, there’s one thing that remains constant: taxes. Are you taking advantage of every possible vehicle to reduce your annual tax bill?

Understanding the Health Savings Account (HSA)

As Wayne mentioned in his previous blog, we provide comprehensive tax planning to our clients, and one of the most overlooked tools in tax planning is the Health Savings Account (HSA). While IRAs are often top of mind, the HSA is the new, shiny vehicle in the parking lot. Medical expenses are a reality for nearly every individual or family each year, so if you fall into this majority, the HSA may be an ideal solution for you.

Why the HSA is a Powerful Tool

The HSA offers unique benefits that make it a powerful tool for reducing taxes. The best part? It’s triple tax-deferred. Any money you contribute to your HSA rolls over year after year and is portable if you change employers. Additionally, distributions for non-medical expenses can be taken penalty-free starting at age 65. This combination of tax benefits makes the HSA a versatile option for long-term planning.

HSA Contributions and Benefits

To take advantage of the HSA, you must be enrolled in a high-deductible health plan. For 2017, the minimum annual deductible for this plan is $2,600, with a maximum out-of-pocket expense limit of $13,100. Contributions to the HSA are tax-deductible, earnings grow tax-free, and qualified withdrawals are also tax-free. However, without a high-deductible medical plan, you cannot contribute to an HSA.

Before making your IRA contribution this year, consider the advantages of contributing to an HSA. With its unique benefits, the HSA might be a better fit for your financial and tax planning goals. Reach out to a Gainplan professional to discuss your savings strategy.

Happy tax season, and let’s go Tigers!

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