A penny saved: reduce your taxes with Health Savings Accounts.

• Author: Stoddard, Jennifer
• Position: Money Talk

Health care reform has been center-stage on the news lately. President Obama is focusing on health care reform on a national scale and locally the Utah Health Exchange is opening creative options and resources for companies. As such, many business leaders are taking a hard look at new avenues for providing health care coverage to their employees.

One option that employers should consider is Health Savings Accounts (HSAs), which can actually help employees save on their taxes. HSAs are savings accounts that can be opened when an individual enrolls in a high deductible health plan. Employers and employees can deposit money in an HSA that will result in a tax deduction. Quite simply, any money deposited will reduce the employee's federal income tax. Just like an IRA, this deduction is an "above the line" deduction which means you get a 100 percent write-off against your adjusted gross income.

You can work with your benefits provider or certain local credit unions to set up your HSA.

For entrepreneurs who often have high deductible insurance plans, HSAs provide a way for employees and business owners to protect themselves financially during times of hospitalization, illness or other medical procedures. For example. The Muddy Boys is a small business that provides drywall services. With current rates the way they are, the company cannot afford to provide health insurance benefits for its employees. The owners, Ray and Woody Taylor, recently opened up an HSA account to provide a buffer for their workers and themselves.

"My employees and I can get hurt at work because we use a lot of power tools and lift a lot of things," says Ray Woody, president of The Muddy

Boys. "Insurance is so expensive and unless my arm's been cut bad enough that it can't be held together by duct tape, I can't afford to go to the hospital. [My] Health Savings Account puts more money in my pocket rather than giving it to wealthy HMOs and high insurance premiums."

HSAs are similar to an IRA account in a few ways. HSA money can be withdrawn from an employee's paycheck and is pre-taxed, unlike a corporate cafeteria or medical flex plan. Employees will not lose any un-used money at the end of the year and any remaining balances at year-end can be carried over to the next year.

When employees needs money, they can complete a withdrawal form or use a debt card that is tied...