2020 Health Savings Account (HSA) Contribution…
Yesterday we shared in our stories that we have successfully maxed out our 2020 HSA contributions. This is incredibly important (and beneficial) for us as self-employed individuals with a high-deductible health plan. For 2020 you can contribute up to $7100 as a family. We’ve blogged about HSA’s before and how extremely beneficial they are not just for qualified health expenses but for tax savings & investing as an additional retirement account.
So how do we qualify for a HSA?
Since we don’t work for a specific employer with subsidized healthcare plans and we are self employed, we are members of a Christian Care Ministry Health-Share Plan. In particular, it’s called “Medishare”. This Health-sharing plan works similarly to health insurance, but operates a little differently. We still have a deductible, but with health share plans it’s called your “annual household portion”. This portion is high which qualifies us for a HSA. The AHP being high also keeps our monthly expense low. This is done intentionally so we can focus our money towards debt & savings.
Is a HSA and a High Deductible Health Plan for me?
- You have to qualify. Either as a self employed individual, or your employer offers a health plan but the deductible is North of $2800 (as a family). If you don’t qualify you cannot open and fund a HSA. If you had a HSA previously, but later end up in a non-qualifying health plan, you can still use the funds, but you cannot add money to it.
- If you use these funds for non-medical expenses, you will be subjected to a 20% penalty if under age 65.
If you do qualify…
- Please know that these accounts are “triple tax advantaged”.
- 1. Pre-tax contributions (you don’t pay tax on the money you add)
- 2. Tax Free Growth (Yep, you have the option to invest your funds into stocks & bonds).
- 3. Tax Free Withdrawals on Qualified Medical Expenses. After age 65, you can take the funds out like a typical retirement account.
- Reduce your taxable income each year for your taxes. This is massively beneficial for those of us chasing debt freedom and financial independence!