CPA Mark J. Kohler explains Health Savings Accounts as tax-advantaged accounts for medical expenses. You need a high-deductible health plan to qualify, can contribute up to $3,450 (single) or $6,900 (family) in 2018, and can invest the money in stocks, real estate, or even cryptocurrency for tax-free growth.
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Have you heard of the health savings account or HSA and how cool they might be? Maybe that's why you're watching this video. Well, I love the HSA and as a CPA and tax attorney, small business advisor, whenever my clients can qualify, I want them to think about the hsa. So what I'd like to do in this video is break down the basics of what they are and maybe five requirements and benefits of the hsa. You're going to love it. First, what is an hsa? An HSA is just that, a health savings account. It's like an IRA for health care. You get a tax deduction, put money in, it can grow tax free and it can come out tax free at any age for a medical expense. Wow, pretty cool. Now an HSA is not the flexible spending account where it's a use it or lose it plan. If you don't use this, it grows to the next year. And it's not like an HRA or health reimbursement arrangement for small business owners where you turn in receipt and you can get reimbursed up to $10,000. Watch my other video on that. You can have both an HSA and a flexible spending account or an HSA and an hra. They're all different types of plans, but the HSA is the most universally used plan. And I love them again because you get a write off on the front page of your return and you can use them whether you're a small business owner or just a wage earner. Either way you can take advantage of the hsa. Now finally, five important issues. First, how do you qualify? Well, you have to have a high deductible health care plan. Now in 2018, that means your deductible has to be at least $1350 if you're single or $2700 if you're married. Filing joint. Now, some of you may say, well, oh my gosh, I like just the simple little copay and I can't have such a high deductible. Folks, why the HSA is there is for those of you that are generally healthy anyway and you're not using the health care plan and if you have a catastrophic problem, you, you've got health insurance to help you. But first, think outside the box here. If you're generally healthy and you're not even using the health insurance that you've got, that's where the HSA comes into play. Maybe you can get a lower premium with a higher deductible and then throw that Money in an HSA for a rainy day, you get a tax deduction to do it. Amazing. Now again, in order to qualify, you have to have the high deductible plan. But don't let that stress you out. Think big here and think long term. Number two, what's the deadline here to get that deduction? Well, the deadline is by April 15 for a deduction for the prior year. That's pretty cool. So if you're in the first of the year in 2019 and you still want the write off for 2018, as long as you have the high deductible plan, you can make that contribution by April 15th and still get the write off for 2018. And of course, you can make a contribution anytime now in 2018 and get the write off as well. Number three, the deduction, the part I love. This is on the front page of your tax return and there's no limit based on how much money you make. There's no phase out or phase in or anything like that. If you qualify for an HSA and you make the contribution, you get the write off. Now this year in 2018, the deduction is $3,450. $3,450 for singles or $6,900 for married or head of household. Whoo. Big write off right off the front page of your tax return. Love it. Number four, it only gets better tax free growth. That's right. You can invest this health savings account and it can grow tax free and then you can pull out the money for any qualified medical expense the rest of your life. And if you die, your spouse inherits it or your kids or whoever you want to name as the beneficiary and it turns into a basically an ira. So the HSA is amazing for this tax free growth benefit. And you don't have to wait till you're 59 and a half or whatever either. You can start pulling money out for medical anytime. Number five, it even gets better, you can self direct your hsa. Now some of you may be thinking, what's self direct? Well, that's the ability to invest your health savings account like an IRA or 401k as well. Invest it in what you know best. That doesn't mean always. Wall street products like stocks, bonds and mutual funds. You can invest in real estate, notes, a small business down the street, even cryptocurrency or gold or silver. That's right. You can self direct your hsa. You just have to set up the HSA with a custodian that allows for a Health Savings account. Pretty cool. And they're all over the place people. Anyway, I hope I've exposed you to the basic requirements and benefits of an hsa. Folks, these are amazing. I love them. I've had one for years and so many of my clients that are trying to save taxes and build wealth consider the hsa. Think about it. I know you'll love it. Thanks so much for watching that video and I want to be your source for tax and legal strategies. 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