Getting a Health Savings Account (HSA) is one of the best ways to pay for your medical expenses and invest for your future while increasing your tax deductions. However, not all health insurance plans allow him to obtain an HSA. In fact, some high-deductible health insurance plans listed on HealthCare.gov have out-of-pocket maximums that are “too high” to qualify for an HSA.
According to IRS rules, if you want an HSA, you must purchase a high-deductible health plan (HDHP) that has a deductible and maximum out-of-pocket costs within certain limits. In 2024, the limits for getting his HDHP eligible for HSA are:
- Single coverage: Deductible of at least $1,600 and out-of-pocket maximum of $8,050.
- Family coverage: Deductible of at least $3,200 and out-of-pocket costs up to $16,100.
My family's 2024 health insurance plan has out-of-pocket costs that are “too high” to qualify for a health savings account. This means that in 2024, my family will no longer be able to pay for tax-deductible medical expenses. This is bad news for our taxes, but I want to make the most of this situation.
If your health insurance plan doesn't qualify for an HSA, here are some ideas for managing your out-of-pocket medical expenses.
1. Open a high-yield medical savings account
As an alternative to a Health Savings Account (HSA), you can also open a savings account for medical expenses. Although you won't get a tax deduction for putting the money in a regular high-yield savings account, this could be your best bet for covering his 2024 medical expenses.
Take the same monthly contributions you put into your HSA and put them into a high-yield savings account at your bank or credit union. Funds placed in this savings account do not receive the 12% or 22% (or higher, depending on your tax bracket) tax break. But with the best high-yield savings accounts, your money can grow for more than 5.00% APY today.
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2. Get a rewards credit card that you can use to pay for medical bills.
I recently opened a travel rewards credit card. This credit card comes with a generous welcome offer that could be worth hundreds of dollars in free travel. I plan to use that card to pay for some of my medical expenses in order to earn the welcome bonus. Maybe this will give you a free vacation!
For example, let's say you open a credit card with a reward that gives you 60,000 points worth $600 on travel bookings. However, to earn these points, he must spend $4,000 within 3 months of account opening. Let's say he has a $2,000 medical bill for a dental procedure or minor surgery. Here's what to do:
- You use your newly opened rewards credit card to pay for a $2,000 medical bill.
- With a rewards credit card, you can spend an extra $2,000 over three months (approximately $667 per month) on everyday expenses like groceries and restaurants.
After three months, you'll have spent $4,000, which is enough to earn you $600 in travel rewards. Her $2,000 medical bill wasn't a tax deduction, but it helped her earn $600 in free travel. This is a significant return on investment and can turn medical expenses into affordable vacations. If you can't get a tax break on your medical expenses, you might want to enjoy it.
3. Open a 0% APR credit card for high medical expenses.
If you have good credit to qualify, some credit card companies offer 0% APR cards with zero interest for a certain introductory period, such as 15 months or more. These 0% APR credit cards are not “medical credit cards.” It doesn't have to be used only for medical expenses. However, medical bills can be put to good use with these cards.
If you have a large medical bill in 2024, or if you anticipate a big expense like an elective surgery or your child's orthodontics, a 0% APR credit card gives you the flexibility to pay without paying. I can. interest. However, be aware of when the 0% introductory period ends to avoid being unexpectedly charged interest.
conclusion
This advice is most appropriate for people who have a significant income and can afford to put aside extra money each month to cover medical expenses. This may not work for you if you're living paycheck to paycheck, don't have great credit, and don't have a lot of room in your budget to use your health care wisely. If that's the case, you'll need to negotiate with your healthcare provider to see if they can offer you a monthly payment plan or help paying your medical bills.
But if you're self-employed or a small business owner and don't have health insurance from your job (or through your spouse), these ideas may help. Even if you don't qualify for tax relief from a health savings account, you still have options to manage your medical expenses in 2024.
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