If you’re looking to save some tax dollars and pay for your medical expenses at the same time, a Health Savings Account is one of the best options currently available.
One of the reasons that a Health Savings Account is useful is because of how difficult it can be to get a deduction for medical expenses. Under the Tax Cuts and Jobs Act, in 2019 you will have to spend 10% of your adjusted gross income before you can get any medical deduction.
That means if you earn $100,000 a year, you would have to spend at least $10,000 on medical expenses before you potentially get to deduct anything on return. That’s difficult to do.
Even if you do manage to meet the 10% threshold, now you have a different hurdle- In order to get credit, you also have to itemize. This means that the total deductions for medical, state and local taxes, mortgage interest and charitable donations has to add up to more than $12,200 for single and $24,400 for married filing joint.
All of these hurdles makes the benefits of an HSA much more appealing.
- Income that you put into a Health Savings Account is removed from taxable income, so your tax goes down. In 2019, you can contribute up to $3,500 for individuals and $7,000 for families to an HSA.
- So long as you spend the HSA dollars on unreimbursed qualified medical expenses, you do not have to pay any taxes on it.
- For Clergy, there is the added bonus of avoiding the 15.3% self-employment taxes that they normally owe on their income.
Do you have more tax savings questions? Clergy Financial Resources is there to help. Visit our website today at https://www.clergyfinancial.com/resources/proadvisor/ for more information on how to schedule a Pro Advisor session.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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