How to start a Michigan Health Savings Accounts

Michigan Health Savings Accounts a tax-advantaged way to reduce insurance costs

A Michigan Health Savings account is a good way to help reduce health insurance costs. HSAs have grown in popularity as a way for consumers to manage the costs of healthcare.

The concept of HSAs is simple. First, to be eligible for an HSA, you must be covered under a high-deductible health plan (HDHP), among other conditions. An HDHP is a plan that has an annual deductible for 2019 of at least $3,500 for self-only coverage and at least $7,000 for families. Also, the HDHP must have a maximum out of pocket expense limit of $6,750 for self-only coverage and $13,500 for family. In other words, you pay for routine medical care like doctor visits, while insurance covers catastrophic medical expenses. Since you accept more of the cost of your healthcare, your premiums will be substantially lower.

Michigan Health Savings Account 2019 Contribution Level

A Michigan HSA is a separate account into which you can deposit pre-tax dollars. The 2019 maximum annual amount you may contribute to your HSA is $3,500 for self-only coverage and $7,000 for family coverage. If you are age 55 or older, you may contribute up to an additional $1,000. Medicare-enrolled individuals cannot contribute to an HSA.

You may take federal income tax-free distributions from a Health Savings Account to pay for qualified medical expenses, including doctor visits, eye, and dental care, and even a portion of qualified Long-Term Care Insurance premiums. Any money not used in the year can remain in the HSA and continue to grow, it’s not a “use it or lose it” type of account.

If you withdraw money for something other than qualified medical expenses before you are 65, the withdrawal will be taxed as ordinary income and subject to an additional 10% tax penalty. At age 65, the penalty tax no longer applies; however, you will pay taxes on any funds that you use for medical expenses that do not qualify.

A Health Savings Account can be a useful financial tool, particularly for those who are uninsured or under-insured. Small business owners or anyone facing the challenge of affording quality health insurance coverage can also benefit. To find out if HSAs are right for you, talk to a financial service professional that knows your needs.