Health Savings Account (HSA) Deduction

You may be able to take this deduction if contributions (other than employer contributions, rollovers, and qualified HSA funding distributions from an IRA) were made to your HSA for 2008.

Health savings accounts (HSA) are tax-deductible savings plans that allow a taxpayer to save pre-tax dollars for future healthcare expenses. HSA are paired with high-deductible health insurance plans. Contributions to an HSA are tax-deductible. Earnings, such as interest and dividends, in the health savings account are tax-exempt. Withdrawals from a health savings account are tax-free as long as the funds are used for qualified medical expenses.

 Limits

Tax deductions for HSA contributions are limited to $2,900 for individual insurance coverage and $5,800 for family insurance coverage for tax year 2008. If you are age 55 or older and not enrolled in Medicare, you can make additional catch-up contributions of $900. No HSA contributions or tax deduction are permitted if you are enrolled in Medicare Part A or Part B.

For tax year 2009, HSA contributions are limited to $3,000 for individual coverage, $5,950 for family coverage, and $1,000 for additional catch-up contributions for people age 55 or older.

 Qualifications

You must be enrolled in a high-deductible health insurance plan and not covered by another type of health insurance plan (such as an HMO or PPO type plan). The high-deductible plan must meet certain rules.