Paying for health care can make the remedy more painful than the affliction. The newest version of tax-exempt medical accounts, though, can lessen the hurt for some owner-operators.
In the older version, the Medical Savings Account, money saved to pay a high deductible or other medical expenses was forfeited if not used by year’s end. The current Health Savings Accounts allow the extra money to roll over year to year.
The major qualifier remains having a policy with a high deductible. Of course, this also is the root of the savings because premiums on such policies are lower. A high deductible means you’re likely to pay 100 percent of your routine health care; should anyone on your policy need major care, the policy kicks in after the deductible is met.
Owner-operator counselors with Denver-based American Truck Business Services often recommend HSAs to their eligible clients, says Vice President Matt Amen. He notes these advantages:
- A wide range of expenses qualify, including chiropractic services and over-the-counter pain relievers. “You can use them for all kinds of things that wouldn’t be approved under traditional insurance,” Amen says. Some retailers help you by noting on receipts which items qualify for an HSA.
- Since they don’t have to fool with insurance red tape or settle for insurer-negotiated rates, some health care providers discount services for their HSA clients. “I’ve heard everything from zero to 35 percent,” Amen says.
- Your taxable income is reduced by whatever you put into the HSA. And unlike money put into an IRA, which gets taxed upon withdrawal, HSA funds never get taxed if they’re spent on health expenses. After you turn 65, you can use the savings on things unrelated to health, but such spending is taxable.
The HSA route isn’t for everyone. But a healthy individual who makes few doctor visits, or an individual or family that simply can’t afford a traditional low-deductible policy, might find it a reasonable compromise between eating rice three meals a day or going without coverage, praying that nothing drastic ever happens. If you’re interested, you can sign up through banks, insurers and other approved companies.
DON’T FORGET TO PENCIL IN $30 …
Nearly a third of early taxpayers this year failed to request their telephone excise tax refund, reports the Internal Revenue Service. This is a one-time deal in which you get $30 to $60 back, depending on how many dependents you claim.
And lest you think your whiz-bang tax preparer is too smart to miss such an easy, well-publicized credit, think again. The IRS said nearly half of the returns failing to claim the credit were prepared by a professional.
… BUT DON’T GET GREEDY
Another IRS tidbit from early returns is that the phone tax refund is one of this year’s top tax scams. With phone bill documentation to show you paid higher excise taxes, you can fill out a form and request a larger refund, but some taxpayers are claiming unjustified amounts – in some cases the total of their phone bills.