The primary tax benefits of an HDHP are largely because of the benefits of having a Health Savings Account (HSA).
Benefits of an HSA
- You can claim a tax deduction for contributions you make that are not pre-tax or made by your employer even if you don’t itemize your deductions on Schedule A.
- Contributions made on your behalf by your employer, including any pre-tax contributions you make through a cafeteria plan, are generally not taxable.
- Unused contributions remain in your account from year to year
- Interest earned on the account is usually tax-free
- Distributions used to pay for qualified medical expenses are tax-free.
- Your account stays with you even if you leave your employer
Qualifying for an HSA
You must have a high deductible health plan (HDHP). An HDHP has a higher deductible than most health plans, and a maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that you pay. You can set up an individual (one person) or a family (more than one person) coverage plan.
For 2017, the maximum contribution to an HSA is $3,400 for an individual plan or $6,750 for a family plan. This is the combined contribution from both you and your employer.
If you're 55 or older, you're allowed to contribute up to $1,000 more for a maximum of $4,400 (individual) or $7,750 (family).
Here is more information on HSAs: