Dental health can have a big effect on your overall health, so it’s important to consider dental costs when you’re budgeting for healthcare and saving with an HSA or health savings account. If you’re eligible for a health savings account, knowing how to get the most out of it can help you balance dental care costs with other health care costs.
“One of the beauties of an HSA is that there are no income phase-outs for contributing money to an HSA, and you receive an above-the-line tax deduction,” said Joel Ohman, a certified financial planner.
Here’s what you need to know to use an HSA for your dental expenses.
HSA Basics: Know What’s Eligible
HSAs require an HSA-eligible plan, such as a high-deductible health plan. Money dedicated to an HSA is taken from your paycheck before taxes, and it earns interest until you use it to pay eligible medical expenses. These expenses include deductibles, co-pays and co-insurance, as well as other qualified expenses that, according to the IRS tax code, treat or prevent a physical or mental illness.
“Generally speaking, the IRS has made clear that dental expenses are considered to be qualified medical expenses, with one important exception: Anything deemed an unnecessary cosmetic dental expense may not be eligible,” Ohman said.
HSA Tip: Know Your Risk Level
Think about your cash flow and how much you spend on health insurance in general. People tend to fall into one of two categories when shopping for a health insurance plan. Some don’t care so much about the monthly premium but want to know that if anything happens, major or minor, their out-of-pocket costs will be low.
“These types of people are attracted to co-pay-type plans,” he said. The other category, people who are generally more concerned with having a low monthly premium, tend to prefer HDHPs, especially those with HSAs, he said.
Calculate how much you can afford to pay each month for premiums, as well as the maximum you can afford to pay out-of-pocket if you would need dental treatment, Ohman said. If it has been some time since you had major work done on your teeth, it might be a good year to set aside some HSA funds for dental work.
HSA Takeaway: Know the Contribution Limits
Under 2017 federal regulations, HSA-eligible plans must have a minimum deductible of $1,300 for an individual and $2,600 for a family. The mandated maximum you can set aside in an HSA is $3,400 for an individual and $6,750 for a family; those older than 55 can add up to $1,000.
In general, financial experts recommend maxing out your HSA. “If you own a health savings account, it is important to note that you can contribute to an HSA all the way up to your tax return due date and have the contribution count for the previous calendar year, up to the IRS limitations,” Ohman said. “This is a great way to get an added above-the-line deduction even after the tax year is over.”
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