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Can't emphasize HSAs enough

It's April, and most of us are thinking about our income taxes, especially if we still need to file or are awaiting a refund.

But regardless of your tax situation, I have a suggestion that can benefit your personal finances and your taxes: Open or contribute to a Health Savings Account, commonly known as an HSA.

At our bank, we're big fans of HSAs. They help people do what we like to see them do: start saving today to meet financial obligations tomorrow. What's more, HSAs allow people to achieve their financial goals in ways that benefit them at tax time.

When you open an HSA, you can use it to put money aside to pay for qualified medical and health expenses, such as visits to your physician, the eye doctor or prescription drugs. An HSA usually takes the form of a checking account. It allows you to save money tax-free, grow it tax-free and spend it tax-free to cover qualified health and medical expenses.

With this triple tax advantage — and no expiration on when you must use your saved health care funds, unlike the old "flex" health-care accounts — there's no better tool to save for health expenses.

To be eligible for an HSA, your health insurance must be a qualified high-deductible plan. That means you pay a deductible of a sufficient amount before your insurance kicks in to cover medical expenses, including prescription drugs. You also can't have any other health insurance, including Medicare, and you can't be claimed as a dependent on someone else's taxes.

Why does it make particular sense to be talking about HSAs at this time of year? If you already have established one of these accounts, have not filed your 2015 taxes and have not made the maximum contribution for 2015, you still have time to do so.

You can contribute up to the maximum of $3,350 for individuals or $6,650 for those with families before the tax-filing deadline of April 18 and still take the full HSA deduction on your 2015 taxes. Those 55 and older can contribute an additional $1,000 to their individual or family HSA and take that as an extra tax break.

If you already have contributed the 2015 maximum or if you have already filed your 2015 taxes, it's still a great time to think about an HSA. There is hardly a better way to use a tax refund than to open an HSA for 2016 or make a 2016 contribution to the account you already own. For 2016, the maximum contributions (and tax breaks) remain at $3,350 for individuals but rise to $6,750 for families. The $1,000 extra contribution (and tax break) for those 55 and older remains in effect.

What if you have filed your 2015 taxes but aren't expecting a refund? Opening or contributing to an HSA for 2016 will allow you to benefit from this tax break and perhaps put you in a better tax position at this time next year.

When you look for an HSA, be sure to ask questions and shop around. Your employer may suggest an HSA provider, but you are free to choose a financial institution of your own. Also, all HSAs are not created equal. Check how much a bank or other financial institution will charge you to keep money in an HSA. It shouldn't be more than a few dollars a month. If it is, consider opening your account elsewhere.

Need help reviewing your HSA eligibility or setting up an account? In a few minutes, your local community bank can get you the answers you need and, if you're eligible, put you on a path to benefiting from one of the best financial tools available.

Shelly Bryant is a vice president of Park State Bank in Duluth. You can reach her at bryantsl@parkstatebank.com or (218) 722-3500.

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