What You Should Know About Health Savings Accounts
What is a Health Savings Account (HSA)?
An HSA is a tax-favored savings account for individuals and families covered by a high deductible health plan (HDHP). Contributions to an HSA are tax-deductible and distributions are tax-free if used for qualified medical expenses.
Can anyone open an HSA?
No. In order to be eligible for an HSA, you must be younger than 65 years old and you must be covered by an HDHP on the first day of the month. The minimum annual deductible for HDHP classification is $1,300 for individuals and $2,600 for a family. You cannot be covered by any other health plan that is not an HDHP, and you cannot be eligible for Medicare benefits. You are also not eligible for an HSA if you can be claimed as a dependent on someone’s tax return.
What are the benefits of an HSA?
An HSA can save you money! Not only will you receive tax benefits for qualified distributions from your account, but you will also receive tax benefits similar to those of IRA-type accounts.
- More affordable than traditional health insurance
- Deposits are tax-free
- Investment earnings grow tax-free
- Withdrawals are tax-free when used for qualified medical expenses
- Take your HSA with you if you change jobs
- Available to almost anyone covered by a high-deductible insurance plan
How much can I contribute to an HSA?
For 2017, the contribution limit is $3,400 for single coverage or $6,750 for family coverage. If you are over age 55, you can make a $1,000 “catch-up” contribution as well. For more information about Health Savings Accounts, speak to your insurance agent, tax consultant or National Iron Bank representative.