Benefits of the Health Savings Account (HSA)
Stop WASTING your Medical Expense Tax DEDUCTION!!
Hypothetical scenario...
Jane runs an online fitness business and buys her own health insurance.
Monthly Premiums = $500/mo or $6,000/year
Additional Out-Of-Pocket costs = $3,000/year (from doctor visits and prescriptions)
After handing her accountant the $9,000 ($6,000 premiums + $3,000 out of pocket) medical expenses...
...Jane found out that her $3,000 medical expenses are NOT deductible!!
Explanation:
Jane’s business will make $300,000 in net profit (after all expenses) in 2022.
In 2022, you can ONLY deduct expenses OVER 7.5% of income…so for Jane that equals expenses OVER $22,500 ($300,000 x 7.5% = $22,500)...
...meaning if her medical expenses were $20,000...she can deduct $0
...if her medical bills were $23,000...she can ONLY deduct $500 ($23,000 - $22,500 = $500)
Tax Breakdown:
$6,000 Premiums = DEDUCTIBLE (self-employed can deduct monthly premiums)
$3,000 out-of-pocket = NOT deductible (she made too much money)
How can Jane deduct the $3,000?
Jane can use a Health Savings Account (HSA).
An HSA allows you to save money and take a deduction for it (only to be used for qualified medical expenses).
Similar to the popular FSA (Flexible Spending Account)…except with an HSA, the money is yours FOREVER.
With that HSA...Jane is allowed to contribute $3,650 in 2022 ($7,300 if she had a family).
Contribution Deadline is April 17th 2023 for her 2022 tax year!! (usually April 15th, unless falls on weekend)
Jane can now put $3,650 into her Health Savings Account for 2022...
...allowing her to fully deduct the $3,000 in medical bills.
Despite having a high business income, Jane can maximize her medical tax benefit!
ACTION ITEMS FOR YOU:
Check if your 2022 Health Insurance is Health Savings Account (HSA) eligible
Make or Maximize HSA Contributions
If possible, do so before April 17th 2023 (usually 15th but falls on a weekend)
As a Fitness Entrepreneur...
...what other tax deductions are you MISSING?
You can benefit from full financial advice that covers tax, cash flow, how to pick the right insurance plans, and much more!
Best
Pat
(Disclaimer: This is meant to be education and not advice for your specific situation. Please consult a qualified professional before making any changes to your health insurance or tax savings strategies.)