Health Care

Health Flexible Spending Arrangements

Amounts you contribute for medical expenses to accounts under your employer’s Flexible Spending Arrangements (FSAs) are not taxed in 2011. Funds can be accessed any time during the year to pay for health insurance premiums as well as medical costs and other expenses not covered by insurance, although they must qualify as a deductible medical expense. Beginning in 2011, the cost of non-prescription drugs other than insulin can no longer be reimbursed by an FSA.

Your company’s plan determines contribution terms and limits. Funds not used during the year, or by the end of any grace period the plan may offer, are lost.

Health Savings Accounts

Health Savings Accounts (HSAs) are designed for individuals covered by a high-deductible health insurance policy and are not covered by Medicare. They offer a number of tax advantages.

Contributions within certain limits are tax deductible and earnings that accumulate within the account are not taxed until withdrawn, and even under those circumstances, withdrawals to pay for qualified medical expenses are tax free. However, withdrawals you may make for medical expenses that are not qualified are both taxable and subject to a 20% penalty unless you are age 65 or older or disabled.

You and your employer can make contributions, and the total maximum contribution is $3,050 for self-only coverage ($4,050 if age 55 or older by the end of the year) and $6,150 for family coverage ($7,150 if age 55 or older and $8,150 if spouse is also age 55 or older by the end of the year).

Information is current as of  Monday, Dec. 12, 2011.

This article was provided by the American Institute of Certified Public Accountants (AICPA).