Medical Savings Accounts
These new accounts offer tax benefits, lower premiums and better financial health.
When Kris and Tammy Kloxin started Designs By Tammy, an Edmond, Oklahoma, flower shop, last January, the last thing they thought they'd get is a good deal on health insurance. But earlier this year, the Kloxins purchased a new, high-deductible health-insurance policy and began contributing about $1,000 per year to a medical savings account (MSA) administered by their insurance company. With family coverage and a $3,000 annual deductible, their total health-insurance costs--including the policy premiums and MSA contributions--have stayed the same.
The difference is the Kloxins' MSA contributions are fully deductible from their federal income taxes. And if they don't spend all the money in their MSA in a given year, they can leave it in the account for use in subsequent years while it accrues tax-free interest.
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