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Health savings accounts (HSA)


What is Health savings accounts (HSA)? HSA is a tax-deductible savings plans designed to save for medical and dental expenses. Contributions to such plans are tax-deductible while earnings accrued on funds in the plan (e.g. interest and dividends) are tax-exempt. Withdrawals from a health savings account are tax-free if used for qualified medical expenses. (for detailed description and list of qualified medical expenses please refer to IRS Publication 502, Medical and Dental Expenses), to use it in your tax return, please click here.
 
Can I claim this tax deduction? To qualify for the Health savings accounts (HSA) Tax deduction you must be enrolled in a high-deductible health insurance plan approved by the Internal Revenue Service and you can not be covered by any another type of health insurance plan (e.g. HMO or PPO). How much can I deduct? For 2010 the maximum deduction is $3,050 for single taxpayer, $6,150 for family and $1,000 for catch-up contributions.

Where do i report ? The Health savings accounts (HSA) Tax Deduction is really an adjustment to the income and not part of the Standard or Itemized deductions. It is reported on form 1040 line 25 and IRS Form 8889 (Form 8889 and Instructions). Insurance companies report your HSA contributions to the IRS using Form 5498-SA. 
 
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