Taxes and Your Health Savings Account (Deductibles)

Taxes and Your Health Savings Account (Deductibles)

Contributions to a health savings account (HSA) are only deductible when they are made after taxes. For an example, a taxpayer who is participating in an employer-sponsored HSA would not qualify for a deduction, due to the fact that their employer is contributing to their HSA fund on a pre-tax basis. This means that no money is being taken out of the contributions to pay taxes, either by the employer or the employee, and so it cannot be counted again in your income tax return as a tax deductible. A pre-tax contribution has already acted as a tax cut for you by lowering your taxable income. HSAs are nice-but they're not that nice.

On the other hand, if you are self-employed and making contributions to an HSA, since you literally cannot do that on a pre-tax basis, those funds are among the allowable federal tax deductions. So even if you are self-employed, an HSA is still a good idea. For more information on HSAs, refer to IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.

Article written by: Letty G.

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