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Tax-Free Health Savings Accounts Tax-free health savings accounts are relatively new on the scene. They have only been around since January 2004. They were originally introduced with the creation of another health benefit - the Medicare Prescription Drug Improvement and Modernization Act of 2003. Tax Free Health Savings Accounts - Know the Basics Tax-free health savings accounts from take care work in conjunction with high-deductible health insurance plans. Basically, they are special savings accounts set aside for medical expenses. The bonus of using such accounts is that they are tax-deferred. These accounts, in essence, allow you to fill in the gaps of your coverage, up to the amount of your deductible. (For individuals under Medicare, this limitation is slightly adjusted.) High-deductible plans are generally cheaper than other health insurance policies, since many routine medical expenses are not generally covered. With tax-free health savings accounts, those qualified expenses that would otherwise not be reimbursed can be paid for. Both employers and employees can contribute to health savings accounts, but the accounts belong to the employees. The balance can also be carried over from year to year and in some cases (such as with surviving spouses), are transferable. Health savings accounts are sometimes referred to as medical IRAs and it is easy to see why. The money that is directed into your HSA reduces your taxable income. Interest earned and money taken out of the account is also not taxed. Taxes and penalties are levied, though, if the money is removed from the account for non-medical related expenses. |
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 Medical Expenses and Income Tax 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 |
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