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    00 in 2007, $900 in 2008, and $1,000 in 2009 and later years.

    Distributions from the HSA used to pay medical expenses, other than most health insurance, are not taxable. The medical expenses may be those of the taxpayer, the taxpayer's spoouse, the taxpayer's dependents, and

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    A taxpayer who is covered by a high-deductible health insurance policy may establish and contribute to a health savings account (HSA). The contributions the taxpayer makes are deductible in calculating adjusted gross income, so a taxpayer does not have to itemize deductions on Schedule A of Form 1040 to receive the deduction. Contributions made by an employer are not taxable to the employee.

    For 2006, for individual coverage, a high-deductible policy must have an annual deductible of at least $1,050. For 2006, for family coverage a high-deductible policy must have an annual deductible of at least $2,100. A plan may have a lower deductible for preventive care. The annual out-of-pocket expenses are limited to $5,250 for an individual or $10,500 for a family.

    The maximum monthly contributions an individual may make to an HSA in 2006 are the lesser of 1/12 of the deductible or $2,700. The maximum monthly contributions allowed to an HSA for a family plan in 2006 are the lesser of 1/12 of the annual deductible or $5,450. Individuals who are age 55 or older may contribute up to an additional $700 in 2006, $800 in 2007, $900 in 2008, and $1,000 in 2009 and later years.

    Distributions from the HSA used to pay medical expenses, other than most health insurance, are not taxable. The medical expenses may be those of the taxpayer, the taxpayer's spoouse, the taxpayer's dependents, and c

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    dule A of Form 1040 to receive the deduction. Contributions made by an employer are not taxable to the employee.

    For 2006, for individual coverage, a high-deductible policy must have an annual deductible of at least $1,050. For 2006, for family coverage a high-deductible policy must have an annual deductible of at least $2,100. A plan may have a lower deductible for preventive care. The annual out-of-pocket expenses are limited to $5,250 for an individual or $10,500 for a family.

    The maximum monthly contributions an individual may make to an HSA in 2006 are the lesser of 1/12 of the deductible or $2,700. The maximum monthly contributions allowed to an HSA for a family plan in 2006 are the lesser of 1/12 of the annual deductible or $5,450. Individuals who are age 55 or older may contribute up to an additional $700 in 2006, $800 in 2007, $900 in 2008, and $1,000 in 2009 and later years.

    Distributions from the HSA used to pay medical expenses, other than most health insurance, are not taxable. The medical expenses may be those of the taxpayer, the taxpayer's spoouse, the taxpayer's dependents, and

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    y must have an annual deductible of at least $2,100. A plan may have a lower deductible for preventive care. The annual out-of-pocket expenses are limited to $5,250 for an individual or $10,500 for a family.

    The maximum monthly contributions an individual may make to an HSA in 2006 are the lesser of 1/12 of the deductible or $2,700. The maximum monthly contributions allowed to an HSA for a family plan in 2006 are the lesser of 1/12 of the annual deductible or $5,450. Individuals who are age 55 or older may contribute up to an additional $700 in 2006, $800 in 2007, $900 in 2008, and $1,000 in 2009 and later years.

    Distributions from the HSA used to pay medical expenses, other than most health insurance, are not taxable. The medical expenses may be those of the taxpayer, the taxpayer's spoouse, the taxpayer's dependents, and

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    n 2006 are the lesser of 1/12 of the deductible or $2,700. The maximum monthly contributions allowed to an HSA for a family plan in 2006 are the lesser of 1/12 of the annual deductible or $5,450. Individuals who are age 55 or older may contribute up to an additional $700 in 2006, $800 in 2007, $900 in 2008, and $1,000 in 2009 and later years.

    Distributions from the HSA used to pay medical expenses, other than most health insurance, are not taxable. The medical expenses may be those of the taxpayer, the taxpayer's spoouse, the taxpayer's dependents, and

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    00 in 2007, $900 in 2008, and $1,000 in 2009 and later years.

    Distributions from the HSA used to pay medical expenses, other than most health insurance, are not taxable. The medical expenses may be those of the taxpayer, the taxpayer's spoouse, the taxpayer's dependents, and certain individual who would be dependents except that they failed certain of the requirements for being a dependent.

    If the taxpayer receives a distribution from the HSA and it is not for medical expenses, the distribution is taxable. If the taxpayer receives a distribution from an HSA for other than medical expenses, the distribution is taxable and the taxpayer must pay a 10-percent penalty unless the taxpayer is age 65 or older, disabled, or dead.

    Medical expenses include optical, dental, and certain non-prescription drugs as well as expenses for physicians, hospitals, prescription drugs, and other traditional medical expenses. A taxpayer may not pay for a medical expense from an HSA and also deduct the same amount as a medical expenses on Schedule A of Form 1040.

    Special rules apply to married taxpayers where each has health insurance. If only one spouse has family health insurance, both spouses are deemed to have family coverage. if both spouses have family health insurance under separate plans, the law treats each spoouse as having a family policy with the lower deductible.

    Taxpayers

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