Health savings accounts (HSAs) have been around for nearly two decades, but many people are unfamiliar with them and the benefits they offer. This article is an overview of how they work, who is eligible for them, and what tax advantages they provide.

An HSA is essentially an interest-bearing, medical savings account that you can use to pay or reimburse certain medical expenses that you incur. Such qualified medical expenses may include (but are not limited to): diagnosis, cure, mitigation, treatment, or prevention of disease; prescribed medications; transportation primarily for and essential to medical care; and certain lodging away from home treated as paid for medical care.

You can set up an HSA on your own in much the same way you would establish an individual retirement account or a traditional savings account. You can open your HSA with a lump-sum payment or arrange to contribute on a regular basis. Any money you don’t spend during the year is rolled over for subsequent years. If you are in good health, it’s reasonable to assume that you could accrue a good-sized balance in your HSA over the years.

ELIGIBILITY REQUIREMENTS

To be eligible for an HSA, you must be covered by a qualifying “high-deductible health plan.” Only limited types of additional coverage are permitted, such as coverage for dental and vision care. You may not be enrolled in Medicare. The Big Advantage — Tax Savings

There are several valuable tax-related benefits to having an HSA:

• You can claim a tax deduction on your federal income tax return for contributions you (or someone other than your employer) make to your HSA.
• Contributions to your HSA made by your employer (including those made through a cafeteria plan) may be excluded from your gross income.
• The contributions remain in your account until you use them.
• The interest or any other earnings on the account assets accumulate tax free.
• Distributions you receive from the account to pay qualified medical expenses are tax free.
• An HSA is portable, which allows it to stay with you if you change employers or leave the workforce.

YOUR HSA BALANCE AS A LEGACY

Your choice of an HSA beneficiary is important. If you pass away and the beneficiary is your spouse, then the account is treated as your spouse’s HSA and your spouse can take tax-free distributions for qualified medical expenses. Basically, the tax-free status of the account continues. If the beneficiary is not your spouse, then the account stops being an HSA and the fair market value of the account becomes taxable to that beneficiary in the year of your death. If your estate is listed as the HSA beneficiary, then the value of the account is included on your final income tax return.

If you meet the eligibility requirements, a health savings account can be a useful tool in your financial planning toolbox. A financial professional can help you look into whether an HSA makes sense for your situation.

For many employers, especially smaller ones, introducing a retirement plan is a big undertaking. Despite the numerous administrative and regulatory requirements that an employer retirement plan entails, many employers remain committed to their retirement plans because they want to help their employees begin the journey to retirement readiness.

Unfortunately, plan participants can sometimes feel squeezed financially and find it hard to sustain their original commitment to saving for their own retirement security. All too often, other competing and more immediate demands are made on their income, forcing them to reduce or suspend contributions to their plans. While it can be disheartening for employers to see participation rates drop off and contribution levels fall, there are steps they can take to keep employees contributing to their retirement plans. Here are some ideas worth considering.

Take a Fresh Look at Your Plan

Would employees participate more and contribute at higher levels if your plan offered or increased matching contributions? Would a more generous vesting schedule encourage higher participation rates? Would offering a plan loan program have any impact? It can be helpful to reassess and review the way your plan is structured to see how it could become more attractive to employees.

Focus on Regular Communications

Use every available platform — live meetings, webinars, emails, intranet articles, etc. — to highlight all the benefits of plan participation. When you reach out to your employees regularly, your messages should always affirm that:

• Plan participants can reduce the income taxes they currently pay when they contribute to their tax-deferred retirement plan.
• Participants do not have to pay income tax on pretax contributions or on any income their contributions might earn until they withdraw money from the plan.
• Contributions in a tax-deferred retirement account can potentially compound more quickly than savings in a taxable account.
• Employer matching contributions are an extra benefit — essentially a bonus that stops when a participant stops contributing to the plan.

Remind Participants That Social Security May Not Be Enough

Social Security retirement payments are a safety net. They help retirees pay their most basic expenses. The reality is that most people will have to save for retirement if they want to maintain a standard of living in retirement that is similar to the one enjoyed while working. There really isn’t an alternative — and an employer-provided retirement plan is one of the best retirement saving options available.

Educate Participants on the Impact of Halting Contributions

It can be helpful to illustrate for participants just exactly how the growth of their retirement plan assets could be affected if they stop contributions even for a short time. They need to understand that temporarily discontinuing plan contributions can come at a high cost.

Help Employees Toward Financial Literacy

Trying to pay off student loans, saving for that first home, or setting money aside for a child’s college education can leave little left over from the average person’s paycheck. There’s little question that the competing financial demands of modern life can be a struggle for most people. However, plan participants need to believe that it is possible to set aside money for retirement and save for other short- and long-term goals. There are financial education resources and tools available that help people budget, manage debt, and lay the groundwork for financial wellness. Your plan’s investment managers or recordkeeper may have these resources available.

Talk with your financial professional. Together, you can develop a strategy to encourage your employees to keep participating in your company’s retirement plan.

The majority of sales and purchases of property are usually settled by the buyer paying the seller an agreed on lump sum up front. However, there are circumstances when it makes sense to structure the sale of property so that payments will be received in installments over a number of years. What are those circumstances and what are the tax consequences of such transactions?

WHEN AN INSTALLMENT SALE MAKES SENSE

An installment sale can be helpful if a potential buyer of your property lacks sufficient cash to pay the full purchase price in a lump sum. The interested party suggests an installment sale in which he or she makes a partial payment now and pays the balance over several years, with interest.

An installment sale may be something to consider if you want to sell a business or a rental property but there has been limited interest from prospective buyers. It can also be an attractive option for tax planning purposes. With an installment sale, you spread out the capital gain (and the tax liability) on the sale over the years you receive payments rather than reporting the income in a single year. By spreading out the income, an installment sale may help keep your income within a desired tax bracket and reduce your potential exposure to alternative minimum tax, net investment income tax, and tax on any Social Security retirement benefits you are receiving.

THE TAX RULES

The rules on installment sales are complex and can trap the unwary. Since you receive payments over more than one tax year, you can defer a portion of any taxable gains realized on the sale. Your total gain on an installment sale is generally the amount by which the selling price of the property you sold exceeds your adjusted basis in that property. The selling price includes the money and the fair market value of any property you received for the sale of the property, any of your selling expenses paid by the buyer, and any existing debt on the property that the buyer assumed or paid.

When you report the sale on your tax return, you include in income each year only the part of the gain you receive or are considered to have received. You do not include in income the part of the payment that is a return of your basis in the property. You have to report interest on an installment sale as ordinary income. Essentially, an installment sale allows you to pay your taxes over time as you collect from the buyer.

WHAT’S NOT ALLOWABLE

The installment sales method is not available for sales of publicly traded securities and certain other sales. You have the option of electing out of installment sale treatment and reporting your entire gain in the year of sale. Electing out may be advantageous under certain circumstances: for example, if you have a large capital loss that can offset your entire capital gain in the year of the sale.

Before entering into an installment sale, we recommend that you consult with a tax professional.

You already have a will — why create a trust? Like a will, a trust transfers property. But, unlike a will, a trust can take effect at any time to distribute and manage assets and save taxes.

Different kinds of trusts can serve different purposes and benefit different individuals or organizations. Following is a brief overview.

TRUST BASICS

Although there are several types of trusts, each having different goals, all are based on one of three models. A testamentary trust is created by your will — which names a trustee to manage the trust assets — and is funded by your estate. The trust’s primary goals are to save estate taxes and provide long-term management of estate assets. A living, or inter vivos, trust is established during your lifetime to manage assets and transfer property outside of probate. A pour-over trust is created during your lifetime but funded after you die with payouts of pension benefits, life insurance, or other property that you haven’t specifically transferred to a person by gift, trust, or will. Living and pour-over trusts may or may not offer tax advantages.

As the trust’s creator, you set up the trust, name the trustee(s) and beneficiary(ies), and transfer property into the trust. You also determine how the assets will be paid out and how long the trust will last.

TRUST ADVANTAGES

If you have a sizeable estate, a trust may offer significant benefits. A trust can provide a lifetime income to an individual and eventually pass the remaining property to heirs. A trust can also ensure professional asset management, protect assets for financially inexperienced beneficiaries, and help you take advantage of tax law benefits to reduce or eliminate estate tax.

REVOCABLE OR IRREVOCABLE?

If you create a revocable living trust, you can modify it by replacing the trustee, changing the beneficiary, or even terminating the trust. A revocable trust can protect your assets if you become unable to manage your affairs. However, such a trust normally does not reduce income taxes while you’re living or estate taxes after you die.

With an irrevocable living trust, the trustee and beneficiaries you name and the property you transfer into the trust cannot be changed (although a trustee may resign and be replaced). Because the property you transfer is no longer yours, an irrevocable trust can provide significant tax savings, since, if income is distributed, the beneficiary – and not the trust creator – pays income tax on the trust’s earnings. When you die, the trust property is excluded from your estate and is not subject to estate taxes. Through the trust, you control the distribution of trust property to your heirs.

CHARITABLE GIVING

Trusts can also be created to benefit charitable organizations while providing tax advantages to the creator. A charitable trust reduces your estate and allows you to take a charitable deduction on your income tax return in the year you establish the trust. Depending on the trust type, you or someone you designate can receive income from the trust assets during the trust’s term (with the assets eventually passing to a charity), or your heirs can receive the trust balance after a charity has received trust income for a specified time.

Science fiction movies and books may portray artificial intelligence as a human-like giant brain with thousands of wires coming from it that control whole cities and their populations. The reality today is that artificial intelligence is unobtrusive, everywhere, and we are interacting with it multiple times daily without always recognizing that we are.

Artificial intelligence is being used by large corporations in a range of areas, including sales, marketing, customer service, employee training/coaching, and logistics. Small businesses can also employ artificial intelligence to improve customer service, reduce costs, and help drive revenues.

WHAT IT IS

Artificial intelligence (AI) is a branch of computer science that focuses on building smart machines capable of performing tasks that typically require human intelligence. Essentially, it endeavors to simulate human intelligence in machines. Examples of AI applications many people are familiar with include smart assistants (such as Siri and Alexa) and virtual agents that interact with customers and guide them to possible solutions. Looking ahead, self-driving trucks and cars are in various stages of development, and some vehicles already have self-driving features.

CUSTOMER SERVICE

AI can be deployed through the use of chatbots to handle a variety of tasks, such as directing callers to the function they want (e.g., automatic payments). On a more complex level, AI can be used online to help customers with product search and discovery and respond to requests with relevant recommendations. Businesses can use data gathered from AI chatbot customer interactions to identify where in the process problems may arise and what these problems are so that they can be eliminated in the future.

LOGISTICS

Moving goods from one point to another requires up-to-the-minute data so that what is being shipped is shipped in the most efficient and cost-effective way possible. Certain AI programs can predict points where congestion may happen and help redirect trucks and vans so that they avoid bottlenecks and slowdowns. AI essentially streamlines the supply chain. It can do something similar when it comes to warehouse management — identifying choke points that slow the movement of goods from point A to point B.

MARKETING

AI marketing sets out to leverage customer data and machine learning to anticipate a customer’s next move and to nudge that customer toward either buying something or increasing his or her average order value. Businesses are using AI to attract, nurture, and convert prospects.

By tracking a customer’s online searches, AI programs can identify what products an individual might be interested in and may be considering buying. AI can target that individual with ads highlighting products or services previously identified as being of interest to the customer. This approach essentially uses machine learning to offer personalized product recommendations.

SALES TRAINING

AI can be used to coach salespeople to improve their sales skills and help them increase their percentage of successful sales calls. AI programs exist that can analyze a number of variables that are used by the most successful salespeople and use that data to identify strategies that can be replicated and utilized by other salespeople within the organization.

As with any technology, there are costs involved in incorporating AI into a company’s operations. A financial professional can assist you in analyzing the costs and potential financial benefits of any new technological enhancements your small business may be considering.