You pay enough already for medical bills and doctor visits, why not take advantage of some tax-free savings? Health Savings Accounts (HSAs) were created so that taxpayers covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses.
To qualify for a health savings account, you must be covered under a high deductible health plan and cannot be claimed as a dependent on someone else’s tax return. What’s considered a high deductible? The IRS provides a table listing the minimum annual deductible as $1,300 for self-only coverage and $2,600 for family coverage.
For 2015, if you have self-only coverage, you can contribute up to $3,350. If you have family coverage you can contribute up to $6,650. Family members or any other person may also make contributions on behalf of an eligible individual.
You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to additional tax. Keep in mind that you do not have to make distributions from your HSA each year, any unused funds rollover. Those paying high deductibles on health plans should seriously consider opening a health savings account. For some tax relief, I would prescribe the HSA remedy.