Taxing Matters

People who have a high-deductible health insurance plan may be eligible to pair that insurance policy with a health savings account. These plans may not be right for everyone, but personally I find health savings accounts particularly appealing from a tax perspective. Individuals get a deduction for savings contributed to an HSA, which can be set up through a bank, credit union or other financial institution. The contribution is tax-deductible going into the HSA, and the funds withdrawn are tax-free as long as they are used for legitimate medical expenses. Plus, individuals have until April 15th to fund their HSA for the previous year (the same deadline for funding IRAs). And unlike flexible spending accounts, the individual always owns his or her HSA funds. They aren't lost at the end of the year if unused.