Expert: Ed McFarland - 11/25/2005

Question
I was shopping for insurance and a health savings accounnt (hsa) was brought up. I was told that the advantage was money can be put in before taxes then pay bills untill the stop loss. I have always compiled all my medical reciepts and gave them to an accountant, because I thought they were used as a deduction. What I fail to see is what is the diffrence between using the hsa or using reciepts to take a deduction?

Answer
The HSA lets you set aside pretax dollars to pay for medical expenses. The deduction for bills you pay with after tax dollars only kicks in when your bills exceed 7.5% of your adjusted gross income.

Unlike past savings accounts that had a use it or lose it, you can over the balance from year to year.

Finally items such as eyeglasses, which were never deductable, now can be bought through the HSA.

Check out sites like http://www.hsainsider.com for more.

Good luck