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Re-examine merits of Health Savings Accounts

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in Small Business Tax

The debate over the constitutionality of the massive health care legislation enacted in 2010 continues. It’s not certain if most of the provisions will kick in as scheduled ... or ever.

Strategy: Take a second look at Health Savings Accounts (HSAs). They may be a tax-smart way for you to handle your medical expenses.

Although HSAs were initially slow to catch on, interest has been heating up. Recent tax law changes have generally improved HSAs.

Here’s the whole story: An HSA is like an Individual Retirement Account (IRA) for medical expenses. Contributions made by eligible individuals can be deducted above-the-line on Form 1040, or your company can make tax-deductible con­tributions on behalf of its employees—or both.

As with an IRA, there’s no current income tax on the earnings within the account. Furthermore, distributions are completely tax-free if the funds are used to pay for qualified medical expenses. Other distributi...(register to read more)

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