Health Savings Accounts

Health Savings accounts were introduced in 2004 with the implementation generally commencing in 2005.  In 2007 the annual deductible limits for a single individual are $2,850 and for a family $5,650.  These plans require a high deductible health insurance plan.  For 2007, the definition of a high deductible health plan is a health plan with an annual deductible that is not less than $1,100 for self-only coverage or $2,200 for family coverage.  The annual out of pocket expenses may not exceed $5,500 for single and $11,000 for family coverage.  An additional $800 is allowed for taxpayers over the age of 55.

Monthly contributions to the Health Savings account may not exceed 1/12 of the lesser of the anual deductible or $2,850 for single and $5,500 for family coverage.

Health savings accounts may be used to pay the out of pocket expenses incurred by the taxpayer. However, the account may not be used to pay the health insurance premiums.

NOTE:  The State of California currently has not conformed to the federal Health Savings account rules, therefore the contributions to these accounts is not deductible for California.  Any distributions from these accounts is taxable income for California.