Leveraging Tax-Favored Health Plans
Health plans and savings accounts can provide significant tax advantages as an integrated part of your financial plan. However, recent legislative changes have made it much harder to take advantage of a tax deduction for medical expenses on your federal income tax return. Fortunately, there are other ways to maximize tax benefits related to healthcare costs.
In this article, Senior Financial Planner Tina Myers reviews these additional opportunities to optimize tax benefits for healthcare costs and explains how they apply to the major plans and healthcare-specific savings accounts available in the market today.
- There are several important options to consider when planning for healthcare costs to limit your tax exposure and budget effectively to manage and safeguard your wealth.Any use of pre-tax dollars that have the potential to grow and be withdrawn tax-free for federal and state tax purposes if used for qualified medical expenses is a win-win.
- Healthcare reform legislation passed in 2010 included a change in the definition of “qualified medical expenses” that impacted reimbursements and withdrawals under all types of tax-advantaged healthcare accounts (i.e., FSAs, HRAs, HSAs, and Archer MSAs).
- In comparing the various tax-advantaged health savings & spending accounts, there are differences in who is eligible to contribute, whether it must be used in conjunction with a high-deductible health plan, dollar limits for contributions and other considerations.