As a small business owner, you know that offering competitive benefits can help attract and retain top talent. One option to consider is a health savings account (HSA). In this blog post, we’ll explain what an HSA is, how it can help save on taxes, and when it makes sense to offer one as a benefit to your employees.
What is an HSA?
An HSA is a tax-advantaged savings account that can be used to pay for eligible medical expenses. To offer an HSA as a business, you must have a high-deductible health plan (HDHP) and meet certain other requirements. Employees can contribute pre-tax dollars to their HSA, and employers can also make contributions on their behalf.
Limitations:
There are some additional limitations to HSAs to keep in mind. For example, there are annual contribution limits, and the funds in an HSA cannot be used to pay for non-medical expenses without incurring penalties.
How do HSAs help save on taxes?
HSAs offer several tax benefits, including:
- Tax-deductible contributions: Contributions to an HSA are tax-deductible, which can help reduce your taxable income.
- Tax-free growth: The funds in an HSA can grow tax-free through investment earnings.
- Tax-free withdrawals: Withdrawals from an HSA are tax-free when used to pay for eligible medical expenses.
When does it make sense to use/offer an HSA?
HSAs can be especially beneficial for small businesses that:
- Offer a high-deductible health insurance plan
- Want to offer a competitive benefits package
- Are looking for ways to reduce healthcare costs
- Want to attract and retain top talent
What if my small business doesn’t offer health insurance?
Don’t worry, an HSA does not need to be tied to an employer plan. You can open an individual HSA as long as you meet the qualifications. Check out Optum, or any of the other health savings account providers, if you’re looking to open an account.
Working with Haworth & Company, Ltd.
At Haworth & Company, Ltd., we specialize in helping small businesses in the Twin Cities manage their finances and plan for the future. Offering an HSA as a benefit for your small business can help you save on taxes, attract and retain top talent, and reduce healthcare costs. If you’re interested in learning more about HSAs or other financial planning strategies for your small business, contact Haworth & Company, Ltd. today. We’re here to help you succeed.
Disclaimer: This blog content is for general informational purposes only, should not be considered professional advice, and does not establish a client relationship. Haworth and Company is not liable for the accuracy of this information or the content of external links. Please use this information at your own risk, ensuring it suits your specific needs, and consult with a certified tax professional for your own personalized guidance.
