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Using health savings plan adds insurance
Save money
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Health savings accounts offer a way to put aside money for medical expenses with pre-tax dollars. Not everyone qualifies for an HSA, but for those who do, it can be a way to save money and reduce your taxes.
The main requirement for an HSA is that you have a high-deductible health insurance policy, and that it is your only coverage. High-deductible policies are those with deductibles of more than $1,150 for individuals and $2,300 for families. One of the benefits of a high-deductible health policy is lower premium costs.
Another requirement is the cap on your out-of-pocket annual expenses (including deductibles and co-payments). For individuals that amount is $5,800 and $11,600 for families.
Annual contributions to an HSA are limited to $3,000 for individuals and $5,950 for families. For those age 55 or older who want to start an HSA and catch up on contributions, an additional $1,000 is allowed.
You must be under age 65 and not claimed as a dependent on anyone else’s tax return.
If you spend the money during the year on qualified medical expenses, the distributions are tax free. However, if you spend the funds for non-medical expenses before you reach age 65, you’ll have to pay the taxes on that money as well as a 10 percent penalty. After that age, you only pay the taxes.
Three big benefits: You can take your HSA with you if you change jobs or health insurance policies. The money rolls over from year to year and accumulates. You can use the money for things your medical insurance might not cover, such as dental and eye care.
Signing up for an HSA is easy. Sign up through a bank or an insurance company. The hard part is deciding on the insurance policy itself, and that’s where an adviser can come in handy.
For tax information, look for Internal Revenue Service Publication 969. (Note that the qualifying deductible and out-of-pocket expenses still show the lower figures for 2008, and they haven’t begun calculating for 2009 yet.)
For 2010, the maximum contribution amounts will be $3,050 for an individual and $6,150 for a family. The catch-up amount for those 55 and older will be unchanged at $1,000.

Uffington does not personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL 32853-6475, or send e-mail to
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