Health Savings Accounts

Health Savings accounts were introduced in 2004 with the implementation generally commencing in 2005.    The 2010 annual limitation on tax deductions is $3,050 for self-only coverage and $6,150 for family coverage.These plans require a high deductible health insurance plan.   An additional $1,000 is allowed for taxpayers over the age of 55. 

The 2012 minimum annual deductible under a high deductible health insurance plan is $2,100for self-only coverage and $4,200 for family coverage. The maximum out-of-pocket limit is $4,200for singles and $7,650 for families. 

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 are not deductible for California.  Any distributions from these accounts is taxable income for California.  Income earned on these accounts is taxable for California.