Basic Knowledge 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 when used for qualifying medical expenses or supplies.
Can anyone open an HSA?
The short answer is no. 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. 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 else’s tax return.
What are some HSA benefits?
An HAS will save you money on medical expenses that you know you may already need. Because an HAS is tax-free, you can set money aside ahead of a procedure to help cover costs your insurance does guarantee. In addition, will you receive tax benefits for qualified distributions from your account, and will also receive tax benefits similar to those of IRA-type accounts.
- 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 2023, the contribution limit is $3,850 for single coverage or $7,750 for family coverage. In addition, if you or your spouse is 55 or old, you can contribute an additional $1,000 “catch-up” contribution. However, be sure to check with your insurance provider or tax agent before contributing to avoid any tax penalties.
For more information on HSA accounts, your employer, insurance provider or tax agent will be able to guide you to what works best for you and your family.