Medical Savings Accounts/HSA Calculator

Medical Savings Account (MSA) Calculator

Medical Savings Accounts (also known as "flex savings" accounts) and HSA (healthcare savings accounts) are great tools where you can save hundreds or even thousands of dollars in taxes a year by spending a few minutes and sending in a few forms and receipts a couple times a year. Most newer plans give you a debit card which you can use to pay for eligible expenses directly, cutting out even this minimal paperwork. Many employers offer these plans as part of a benefit package, and the self-employed can open up their own account through third party organizations. HSA's are usually paired with high deductible health plans (HDHP) to cover the out-of-pocket healthcare deductible costs.

I am amazed more people do not use these plans. Their are also similar Child Care "Flex" Savings Accounts to cover child care costs. The general idea is you contribute some fixed pre-taxed amount of money each year, and you either submit receipts and are reimbursed for all eligible expenses, or you use a debit card to directly pay for eleigble expenses. So you are in essence getting your own money back, just that it has never been taxed. Note that not only are these funds exempt from federal and state tax, but also from the 7.65% FICA tax as well.

Also note that these work as zero interest loans on top of all the tax savings. For example, if it is December and you want to have Lasik surgery in January, you add $1800 to your MSA account for the next year and get the surgery done in January. The MSA account deducts an extra $150 every month from your paycheck throughout the year, but you have already received the surgery without having paid all that money yet. HSA plans can even be caring forward into the following years and the funds can be invested tax free in various asset classes.

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