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You still have time to reduce your taxable income before the April 18 deadline. One strategy is to add money to your Health Savings Account (HSA).
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“The IRA and HSA deadline is the April 18 tax filing deadline,” Eric Bronnenkant, tax manager at Betterment, told CBS MoneyWatch. “Once you miss them, you can’t get them back.”
An HSA is a tax-advantaged medical savings account that allows you to set aside pre-tax money to pay for eligible medical expenses. HSAs are used by taxpayers who are enrolled in high-deductible health plans. The IRS considers high-deductible plans to be any plan with a deductible of at least $1,400 for an individual or $2,800 for a family, CBS MoneyWatch reported.
According to the IRS, the 2021 annual limit for someone with personal coverage under a high-deductible health plan is $3,600. For someone with family coverage under a high-deductible health plan, the limit is $7,200. For the 2022 tax year, single coverage will increase to $3,650 while family coverage will increase to $7,300.
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HSA contributions are tax-deductible, which reduces your taxable income by the amount you contribute, CBS MoneyWatch noted. This money also grows tax-free, and any funds you withdraw to pay eligible medical expenses are also tax-free.
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