Health Insurance In Alaska

November 29, 2009 8:32 AM | Alaskan Photo Tours

health insurance in alaska

Health Savings Accounts and Tax

HSAs have a "triple" tax advantage of a federal tax standpoint. Individuals receive tax benefits HSAs fully in federal income tax return (or through a salary reduction program in certain employer-sponsored settings) regardless treatment including the state tax on HSA.

A beneficiary of the account may take a deduction above the line (ie, the quantities can be used to determine the individual's adjusted gross income before standard or itemized deductions are considered) for contributions made to an HSA in any month of the year contributory of the person that the person is eligible. The allowable deduction can not exceed the sum of the constraints "monthly" for those months. In 2006, the limitation monthly for any month is 1/12th of the following amounts:

– For those with individual coverage on the first day of the month, the lesser of the annual deductible established in the HDHP or $ 2,700.

– For those with family coverage on the first day of the month, the lesser of the annual deductible under the HDHP or $ 5,450.

Funds in an HSA grow on a tax-deferred, and distributions from an HSA are tax free as long as the funds are used for qualified (as defined Section 213d of the IRC) health care expenses.

How does the state tax treatment of HSAs differ from federal tax treatment?

HSA (and the enabling legislation) are federal. As a federal program, each state decides whether to: a) comply with federal standards, or, b) establish their own state guidelines concerning the tax treatment of HSAs. As a result, some income may be tax free at the federal level can not be free of taxes at the state level.

Many states harmonize its tax system with the federal government. Those states are: Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maryland, Missouri, Mississippi, New York, Montana, Nebraska, New Mexico, Oklahoma, North Carolina, North Dakota, Pennsylvania, South Carolina, Oregon, Rhode Island, Virginia, Utah and Vermont.

Other states, however, treated differently from the federal HSA, at least for tax purposes. The following states have indicated that legislation must be approved at the state level to receive HSA tax benefits at the state level: California, Illinois, Maine, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, Ohio, Washington DC, Wisconsin, West Virginia and Tennessee. New Hampshire and Tennessee do not tax income, but dividends and interest. Alabama has not indicated its position in relation to the level of state tax benefits for HSA. Finally, some states are not affected by income tax guidance vis federal vis-à-HSA: states are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

About the Author

Kurt Stammberger is VP, Marketing at Healthia Inc. Healthia provides integrated comparison-shopping information on
health care products and services, doctors and health insurance plans to empower the drive towards Consumer-Driven Health Care

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