Taxpayers who contributed (other than employer contributions, rollovers, and qualified distributions from an IRA) to a Health Savings Account (“HSA”) may be able to deduct such contributions. HSA’s are tax-deductible savings plans that allow a taxpayer to retain pre-tax dollars within the account for future healthcare expenses.
To qualify for a HSA, and thus the health savings account deduction, a taxpayer must be actively enrolled in a high-deductible health insurance plan1 and not covered by another type of health insurance plan (such as an HMO or PPO type plan). The deduction also has a monetary limit: only $3,100 can be deducted for an individual HSA coverage plan. For family HSA’s, the taxpayer may deduct up to $6,250. Finally, taxpayer’s age 55 or older holding such a policy are entitled to an additional $1,000 deduction ($4,100 or $7,250, respectively).
Taxpayers seeking to take this deduction must first complete Form 8889. The value calculated on Line 12 from Form 8889 will then be transferred to Line 25 of Form 1040.
1a health insurance policy with (1) abnormally high deductible levels (usually range from $1000.00 to $5000.00) and (2) monthly premiums much lower than traditional plans
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