What if you received a $100 medical bill, which is more than you expected to pay.
However, after a closer look, the bill indicates that actually, since you recently participated in a local fun run or completed an office health challenge, you get a thirty dollar credit on your bill. Thus, you only have to pay $70. That kind of savings would make anyone jump for joy. Paying less than expected on anything is cause for celebration, and that’s the feeling a Health Savings (HSA), Flexible Spending (FSA), or other Tax-Advantaged Account provides. Excited yet? Here’s a closer look at the benefits of each account.
Decreased paycheck increased savings
If you open an HSA, FSA, or other consumer account, you can choose the amount that is taken out of your paycheck each month. However, most consumers think that because their pay-check deposit goes down, they are losing money. Don’t panic, it’s actually the opposite. if you choose to put away even one-hundred dollars, that money is not taxed, so you get 100% of what you earned. Think of this as the IRS giving you a tax credit every payday and you still have those dollars easily available to be used on healthcare, day care, or even commuting to and from work.
What the H is an HSA?
Used in conjunction with a High-Deductible Health Plan, a Health Savings Account (HSA) is like a personal savings account, but the money is only used for qualified healthcare expenses. Whether you are healthy or sick, you always have some sort of annual medical cost, so why not take advantage of an HSA and receive triple the savings. When you open an HSA you aren’t taxed on:
That’s right, your HSA dollars don’t go away or get lost like that sock between the hamper and the dryer. Those dollars, if unspent, are yours forever and can grow daily based upon additional contributions, interest, or by investment gain. You won’t be taxed on all the money you save if you use it on medical related services. These accounts help you budget and plan for your future healthcare spending needs so you can be prepared for any medical necessities.
A Flexible Spending Account is another great way to save and have dollars set aside to be used for either healthcare, dental/vision, or even paying for day care while you are at work. These types of accounts are a little different than an HSA as these dollars can’t always be carried over unless your employer allows the $500 carryover option. This means, you will want to spend everything in them each year so be sure to pick a manageable amount.
If you wear glasses or contacts, go to the dentist twice a year, have a prescription, or you are paying for child care while at work, this account option would be a perfect way to budget for these expenses while receiving some tax savings as well.
Annual Enrollment is right around the corner for most consumers so don’t miss out on getting your discount or credit this year for spending dollars you are or will be spending any way. Enrolling in a Health Savings Account (HSA) or Flexible Spending Account (FSA) can help you save money (and get some sweet tax breaks) for when you need it most. Benjamin Franklin said, “A penny saved is a penny earned” so be wise and put those pennies to work for you!
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