(SOUNDBITE OF SONG, "12 DAYS OF CHRISTMAS")
DAVID GREENE, HOST:
Yes. Time again for our 12 Days of Tax Deductions. It's our way of making sense of the tax deductions, credits and breaks political leaders are sorting through as they try to wrestle more revenue out of the tax code.
RENEE MONTAGNE, HOST:
Today, we look at the Health Savings Account deduction. Not to be confused with Flexible Spending Accounts, which are offered in workplaces.
GREENE: Health Savings Accounts started in 2004. They're only for people with cheaper health insurance plans that carry higher deductibles than standard plans. So HSAs are a way for people to save money to pay those higher deductibles.
MONTAGNE: You can think of it as a retirement savings account. You put pretax money into the HSA account, reducing your gross income, and that money can earn interest.
Here's how Barbara Weltman explains it. She's contributing editor to J.K. Lasser's "Your Income Tax 2013."
BARBARA WELTMAN: The amount in the savings account can be taken out to pay for un-reimbursed medical expenses on a tax free basis. The earnings on this account accrue on a tax deferred basis. And you get to deduct it up front. This is the only triple tax benefit in the law.
GREENE: About 14 million people are enrolled in HSAs, at last count, and their deductions mean that the government loses about $3 billion in tax revenue.
MONTAGNE: And the government is about to lose more on that deduction, because starting next year, contribution limits will rise to a top amount of $3,250 for individuals, and $6,450 for families.
Tomorrow, we talk about a tax credit that's critical for the working poor.