Released: October 26, 2008

Still time for a health savings account

Source: Anne Kates Smith, Kiplinger's [Washington Post] (Free Registration)

It’s not too late to set up a health-savings account this year and contribute the maximum amount - as long as you get moving by Dec. 1.

Health-savings accounts are tax-favored, individual accounts used in conjunction with qualified health-insurance policies that carry high deductibles. HSAs confer a triple tax break: You fund them with pretax earnings (or with contributions deductible from your taxable income), investment returns compound tax-free, and withdrawals are not taxed as long as you use the money for medical expenses. The number of HSA converts grew 36 percent last year, to more than 6 million.

New IRS regulations allow people who are eligible for an HSA on Dec. 1 to stash the full amount permitted for all of 2008 in their accounts - up to $2,900 for an individual (add a catch-up contribution of another $900 if you’re 55 or older) and $5,800 for a family. The catch: You must remain eligible for an HSA through 2009.

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