Insurance Tax Strategies

Insurance products offer some of the most powerful tax advantages in the US tax code. Understanding HSAs, FSAs, 1035 exchanges, and Section 125 plans can save thousands annually.

HSA — The Ultimate Tax-Advantaged Account

Health Savings Accounts are the ONLY account with TRIPLE tax advantages: tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. 2026 Contribution Limits: $4,400 (individual) / $8,750 (family). Age 55+ catch-up: additional $1,000. HDHP Requirements (20

FSA and HRA Strategies

Flexible Spending Accounts (FSA): Pre-tax contributions up to $3,300/year (2025). Use-it-or-lose-it (employers may offer $640 rollover or 2.5-month grace period). Cannot have both a general FSA and HSA — but CAN have a Limited Purpose FSA (dental/vision only) alongside an HSA. HRA (Health Reimbursem

1035 Exchanges

1035 exchanges allow tax-free transfer between like-kind insurance products: Life insurance → Life insurance (different policy/company) Life insurance → Annuity Annuity → Annuity NOT allowed: Annuity → Life insurance (this is a taxable event). Why use it: Switch to a better policy without triggering

Section 125 Cafeteria Plans

Section 125 allows employees to pay for insurance premiums and qualified benefits with PRE-TAX dollars. This reduces your taxable income, saving you federal income tax + FICA (7.65%) + state tax. At a 22% federal tax bracket + 7.65% FICA + 5% state = 34.65% tax savings on every dollar contributed. E