November is normally when employees are also asked to choose their health care option and determine the funding of their FSA.
Review these carefully. If you are a healthy individual who does not have much in the way of medical expenses you may find that a high deductible plan with an HSA option is the best way to go.
With the high deductible plan normal maintenance expenses will not be coverage. Depending on the plan you may have to spend $1000 or more before expenses are covered so you will need to pay out-of-pocket for routine visits to the doctor and for prescriptions. The medical premiums you pay will be significantly lower so you should save money overall.
If you pair this high deductible plan with an HSA account it gives you the opportunity to put money away, tax deferred towards future medical costs. It would turn normally nondeductible medical costs into being paid by tax deductible dollars. The money put into an HSA is an adjustment on the front of the 1040 thereby reducing current year taxes. Money in an HSA remains in the account until you use it, it is not ever lost.
If you have a lot of routine medical expenses then an FSA may be the way to go if your employer offers one. An FSA allows you to put money into an account which can then be used to reimburse you for medical expenses such as co-pays, prescription costs, chiropractic and acupuncture expenses, vision and dental expenses, and other medical expenses that may not be covered by insurance. You must decide how much you want to put into the account now, to start in January. The maximum allowable is $5000 per year.
Money goes into your account before taxes. So – if you are putting $5000 into the account and are in the 25% tax bracket you would save $1250 in taxes (plus probably state taxes). When you take the money out of the account to use for medical expenses you do not pay taxes on it.
The caveat here is – you need to use the money by the end of the year (or in some cases March 15th of the following year, check with your employer for your date). If you do not use it by the end of the year, then you lose it. So – be sure you estimate appropriately in determining how much to put into this account.
Many individuals do not put money into this account because they are afraid of losing some it. Even if you overestimate and end up losing $300 at year end from the account, the tax savings for the remaining amount you spent would probably be greater than what you lost. If you want to protect yourself from losing money, then maybe estimate low. Realize then you may not be getting the full benefit available to you.
November is normally when employees are also asked to choose their health care option and determine the funding of their FSA.
Review these carefully. If you are a healthy individual who does not have much in the way of medical expenses you may find that a high deductible plan with an HSA option is the best way to go.
With the high deductible plan normal maintenance expenses will not be coverage. Depending on the plan you may have to spend $1000 or more before expenses are covered so you will need to pay out-of-pocket for routine visits to the doctor and for prescriptions. The medical premiums you pay will be significantly lower so you should save money overall.
If you pair this high deductible plan with an HSA account it gives you the opportunity to put money away, tax deferred towards future medical costs. It would turn normally nondeductible medical costs into being paid by tax deductible dollars. The money put into an HSA is an adjustment on the front of the 1040 thereby reducing current year taxes. Money in an HSA remains in the account until you use it, it is not ever lost.
If you have a lot of routine medical expenses then an FSA may be the way to go if your employer offers one. An FSA allows you to put money into an account which can then be used to reimburse you for medical expenses such as co-pays, prescription costs, chiropractic and acupuncture expenses, vision and dental expenses, and other medical expenses that may not be covered by insurance. You must decide how much you want to put into the account now, to start in January. The maximum allowable is $5000 per year.
Money goes into your account before taxes. So – if you are putting $5000 into the account and are in the 25% tax bracket you would save $1250 in taxes (plus probably state taxes). When you take the money out of the account to use for medical expenses you do not pay taxes on it.
The caveat here is – you need to use the money by the end of the year (or in some cases March 15th of the following year, check with your employer for your date). If you do not use it by the end of the year, then you lose it. So – be sure you estimate appropriately in determining how much to put into this account.
Many individuals do not put money into this account because they are afraid of losing some it. Even if you overestimate and end up losing $300 at year end from the account, the tax savings for the remaining amount you spent would probably be greater than what you lost. If you want to protect yourself from losing money, then maybe estimate low. Realize then you may not be getting the full benefit available to you.
