Introduced in 2003, a Health Savings Account (HSA) used in combination with a high deductible health care plan provides three tax advantages:
- Income tax deduction for annual contributions
- Tax-deferred growth
- Tax-free withdrawals for qualified health care expenses
Depending on the fate of the current health care law, the HSA could become even more useful. Both the new president and Republicans in Congress have called for an increase in the contribution limit to the maximum out-of-pocket limits for high-deductible health plans. If those rules take effect in 2017, the individual HSA limit would rise from $3,400 to $6,550 for individuals and $6,750 to $13,100 for family plans. It has also been proposed that an HSA should not be subject to estate taxes when passed on to beneficiaries.
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