Top 5 Reasons to Start a Health Savings Account (HSA) Before Year-End
A Health Savings Account (HSA) is one of the most flexible and beneficial financial tools for covering healthcare costs while saving for the future. If you’re eligible for an HSA through a high-deductible health plan, starting your account before year-end can maximize its benefits. Here are the top reasons to open an HSA before the calendar turns.
Immediate Tax Benefits for 2024
Contributions to an HSA are tax-deductible, which means they reduce your taxable income for the year. If you start your HSA before December 31, 2024, you’ll be able to claim deductions on your 2024 taxes, even if you fund the account with a single contribution by the year’s end. These tax savings are valuable both for reducing current taxes and boosting year-end financial flexibility.
Pro Tip: Contributions can be made up until the tax-filing deadline in April, but opening the account this year allows you to start saving sooner.
Triple Tax Advantage for Long-Term Growth
HSAs offer a unique triple tax advantage: contributions are tax-deductible, any growth or earnings are tax-free, and qualified withdrawals for healthcare expenses are also tax-free. By opening an HSA now, you’ll benefit from this tax-advantaged growth starting in 2024. Any unused funds roll over from year to year, and you can invest your HSA funds for long-term growth, similar to a retirement account.
Benefit: Use this tax-free growth to accumulate savings for healthcare needs in retirement, when medical expenses are typically higher.
Pay for Qualified Expenses Anytime—Without Penalty
One of the most convenient aspects of an HSA is that there’s no time limit to use the funds for qualified medical expenses. Whether you need to cover out-of-pocket costs this year or you want to save for future medical needs, HSAs provide flexibility. Opening your account before year-end enables you to start covering qualified expenses immediately and reimbursing yourself tax-free for eligible out-of-pocket costs.
Eligible Expenses Include Doctor visits, prescriptions, dental care, vision expenses, and certain medical supplies.
Maximize Contributions for a Head Start in 2025
Starting your HSA this year means you can make contributions for both 2024 and 2025 within just a few months, helping you build a solid balance quickly. For 2024, the HSA contribution limits are $3,850 for individuals and $7,750 for families, with an additional $1,000 catch-up contribution if you’re 55 or older. Making the full contribution this year lets you start the new year with a balance ready to cover anticipated healthcare costs.
Tip: Setting up an automatic monthly contribution in 2025 can help you stay on track with contributions throughout the year.
Added Flexibility for Future Financial Needs
Unlike Flexible Spending Accounts (FSAs), HSAs offer unparalleled flexibility with no “use it or lose it” rule. The funds in your HSA roll over each year, and they’re yours to keep, regardless of employment status. HSAs are portable, so even if you change jobs or retire, your HSA remains available for you to use. Additionally, once you reach age 65, you can make penalty-free withdrawals for any purpose (though non-medical withdrawals are taxed as regular income).
Long-Term Advantage: HSAs can even function as a supplementary retirement account, giving you another layer of financial security.
Take Advantage of an HSA Today for Immediate and Future Benefits
Starting an HSA before year-end lets you take advantage of tax savings, invest in your long-term healthcare needs, and establish a flexible financial tool that grows with you. If you have questions about setting up an HSA or how it fits into your financial plan, reach out to us at ICCU—we’re here to help you get started!
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