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?
Each year, the IRS reviews and determines the dollar amount that can be contributed into your Health Savings Account. Please refer to the IRS website yearly at https://www.irs.gov/help/telephone-assistance to review that amount or speak with your insurance agent or tax consultant for more assistance.