HSAs Offer a Triple Tax Benefit
Jackie Himes, CPA, Tax Manager
Focused on You. Dedicated to Your Success.
February 5, 2018

An article published on February 1, 2018 on CNBC entitled “ If You've Maxed Your 401(k), Here's Another Way to Save Big ” by Darla Mercado explains the triple tax benefit of a health savings account:
  1. Assets in a HSA grow free of taxes.
  2. Savers can contribute to a HSA on a pretax or tax-deductible basis. 
  3. HSA account holders can tap the assets free of taxes, provided the money goes toward qualified medical expenses as defined by the IRS.

A HSA is typically used in conjunction with a high-deductible health insurance plan. Employers, insurance companies and/or banks can open a HSA on behalf of an employee or person who is independently insured. Employers and/or employees can contribute to the plan. 

Annual contributions for 2018 are limited to $3,450 if you’re single or $6,900 for families. Individuals who are age 55 or over can contribute an additional $1,000. Funds in a HSA can be invested and the balance rolls over to the following year.

In addition to a direct deposit, there are three ways to fund a HSA:
  1. Rollover the funds from a custodial account and deposit the money in the HSA within 60 days. This type of transaction can only be done once per year. Depending on the type of account and circumstances, the account holder may be subject to tax on the funds being transferred, especially if the deadline is missed.
  2. Initiate a trustee-trustee transaction which is not considered a rollover and can be done an unlimited number of times each year.
  3. Transfer the funds from an individual retirement account. This is a once-in-a-lifetime transfer that cannot exceed the annual HSA contribution limits set by the IRS.

The article also discusses several ways account holders can invest HSA funds to earn a higher return. 

As always, we are here to discuss your situation. Feel free to call any member of the McCarthy & Company team at 610.828.1900 or email Jackie Himes, CPA, tax manager at Jacquelyn.Himes@MCC-CPAs.com or myself at Marty.McCarthy@MCC-CPAs.com . We are always happy to help. 
Martin C. McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company, PC

Disclaimer This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).