HSA Becomes More Attractive in 2013

Starting in 2013, Health Savings Accounts (HSA’s) become a lot more attractive due to a couple changes that take effect this year which are part of the new health care reform law (PPACA).

1.  Flexible Spending Accounts (FSA’s), which are “use it or lose it” type of account, are now capped at $2500 (down from the current $5000 limit)

2.  The percentage level where you can itemize your out of pocket expenses on Schedule A for medical, dental and vision expenses increases from 7.5% up to 10% of your adjusted gross income (AGI)

Both of these new rules hit the middle class who have high out of pocket expenses.  These people should highly consider choosing an eligible high deductible health plan paired with an Health Savings Account (HSA), as the deduction for an HSA occurs on the front page of your 1040 tax form, with no need to itemize on schedule A.  This ensures that you get to deduct every penny starting at dollar one, up to a maximum $3250 for individuals and $6450 for families in tax year 2013.

Most people who don’t own an HSA or FSA, believe they get to tax deduct all of their out of pocket expenses.  These same people are the ones that hand over a “shoe box” full of receipts to their accountant, but never take the time to see how it spills down on their tax forms.  Most don’t ever hit the 7.5% of AGI level, and even fewer will hit the new 10% of AGI level in 2013.

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