How do Health Savings Accounts work?
In order to use your Health Savings Account funds tax-free, you must first establish an HSA account before you incur qualified medical expenses. Otherwise, the expenses will not qualify for tax purposes.
How much can I contribute to my HSA?
The maximum yearly contributions (and their associated tax deductions) are determined each year by the IRS. If you are 55 or over, you can add an extra $1,000 per year in catch-up contributions to an HSA if you want.
Unless certain circumstances exist, there is no minimum contribution required to open an HSA, and you do not have to contribute the maximum each year. But regular contributions will help you save more for medical expenses and maximize the tax benefits HSA plans offer.
How do I get my HSA tax savings?
Enjoying the tax advantages of an HSA is easy:
- You will be sent a 5498 tax document showing the amount you contributed to your HSA for each tax year. Your statement will arrive after April 15th of the following year. You can deduct this amount, provided it is less than or equal to the maximum allowable contribution.
- Account holders, employers and many others can make contributions outside the plan structure which can result in tax deductions and a reduction in your adjusted gross income before any itemized or standard deductions are considered.