What is an HSA?
If you’re looking to exercise more control over your healthcare costs, a Health Savings Account (or HSA) may be worth considering. An HSA is a savings and investment account which allows you to save funds for medical related expenses, while taking a tax deduction for the contributions you make into the account each year, provided they meet the government guidelines. The investment income on an HSA account is also excluded from your taxable income. No taxes are paid on the funds in the account and they generally remain tax sheltered upon withdrawal, when used for payment of medical expenses.
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The ability to put aside funds for the payment of medical costs and then deduct those funds from your annual taxable income, is one of the main advantages of creating an HSA. Since the account also provides a tax-sheltered investment opportunity, tax savings are also realized on the income gained through the account’s investments, as well.
Since, an HSA can be established by an individual or accessed through an employer’s plan, the Health Savings Account provides great flexibility to individuals and families wanting to choose their own insurance plan and/or want to have funds available to cover healthcare costs which are not covered under their insurance plan. Healthcare plans held by HSA participants must fit the government’s guidelines for high deductible policies, however.
Unlike a Flexible Spending Account, an HSA belongs solely to the individual and can continue to grow from year to year, even when provided through your employer. The account also remains portable, so you can still access the funds in an employer provided account after you change employers. When you establish your own individual HSA account, you also have the advantage of self-directed investment opportunities that go beyond conventional investment vehicles.
Health Plan Limitations
As stated above, there are strict guidelines on the type of health insurance policy that can be carried by an individual who is also contributing to an HSA, and these are always very high deductible policies. This means that the owner of an HSA is assuming some risk, since illness and the need for medical treatment can be unpredictable. If you have a $5,000 deductible and only $2,000 in your HSA account at the time of a major medical expense, you will still need $3,000 from your own pocket to just to pay the gap between your HSA savings and the deductible.
Contribution and Withdrawal Limitations
There are limitations to the amount of funds that can be contributed tax-free to an HSA account annually, and, although there are no limitations on the amounts that can be withdrawn, there are limits on what those withdrawals can be spent on to avoid tax penalties.
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Personalized, timely service is something our clients have found they can rely on with Provident. We make sure that every IRS recording and reporting requirement is met and that our clients fully understand what their options and limitations are in regard to their Health Savings Accounts.
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The Provident approach focuses on simplifying the complex for our clients. Provident is owned and operated by a team of tax attorneys and highly qualified professionals, who know how to keep things simple and easy to understand.
All it takes is a phone call, to begin your relationship with the professionals at Provident, though we’d be happy to meet you in person at our Las Vegas office as well.
Give us a call at (888) 855-9856. We’d be happy to answer your questions related to setting up and investing through a Self-Directed Health Savings Account or any other self-directed investment options that you are considering.