HEALTH SAVINGS ACCOUNT: THE HEALTH SAVINGS ACCOUNT THAT CAN SAVE YOU ON TAXES IN THE USA

 HEALTH SAVINGS ACCOUNT: THE HEALTH SAVINGS ACCOUNT THAT CAN SAVE YOU ON TAXES IN THE USA

Those looking to save on their taxes in the US may have discovered a useful option in the Health Savings Account. Its operation is relatively simple, as it involves making contributions from your salary before paying taxes, then withdrawing the money (which is therefore tax-free) to cover healthcare costs. Explanations

The Health Savings Account: How does this account work?

Health Savings Account beneficiaries enjoy immediate benefits. Out-of-pocket expenses, prescription drugs, and other healthcare expenses are covered by this account, allowing you to save up to 40% on your taxes in the US, legally!

Additionally, the list of eligible expenses has recently expanded: in addition to medical expenses, it is now possible to deduct basic over-the-counter items such as contact lens solution, tampons, pregnancy tests, sunscreen, and lip balm!

And for those who can reach into their own pockets to cover their health care expenses without touching the HSA, the savings are even greater!

The HSA: a tax-free savings and investment tool in the USA

Just like an IRA or a 401(k) plan, which is a funded retirement system, you can invest in an HSA. This means you can contribute money to this account before paying taxes. The money grows over time and is then available at retirement to cover eligible expenses, all without paying taxes.

Only 6% of Americans use this investment feature of the Health Savings Account… this is probably due to the fact that, currently, the possibility of saving on taxes in the USA while building up assets to cover health costs in the long term, is probably still little known.

How to benefit from the Health Savings Account and pay less tax in the USA?

The HSA has more than one trick up its sleeve: it imposes no time limit on beneficiaries who can receive reimbursements as long as they are able to produce receipts for their expenses.

Let's say you have $5,000 in your HSA this year. Let's also say you don't touch the funds and keep receipts for every eligible expense while continuing to contribute.

By the time you reach retirement age, in a few years, your regular contributions, dividends, and interest will have grown your savings to $50,000. This figure is completely fictitious, of course! You can now cash in your receipts all at once, tax-free, and use the income generated to finance your retirement... or any other purchase.

To qualify for the HSA, contact your healthcare provider to see if you're eligible. If so, create an account and set up automatic contributions so that your contributions are deducted from your paycheck each month. This way, you won't have to think about or even worry about making your contributions.

While many U.S. residents now benefit from a Health Savings Account, few are fully utilizing it to take advantage of U.S. tax savings. With a closer look, you can optimize how you use this account to benefit today—and tomorrow!