Paired with an eligible health insurance plan, a Health Savings Account (HSA) is a tax-advantaged savings account that allows you to pay for qualified medical expenses tax-free. HSA's increase your health insurance buying power four-fold:
Visit our affliated site HSACenter.com for more information about how HSAs work.
The IRS determines what medical expenses are qualified for tax purposes. These can change at any time. But generally, services or items purchased to help ease or prevent a physical or mental defect or illness constitute a “qualified” medical expense.
IRS publication 502 provides a comprehensive list of all current qualified expenses. But, please always consult your tax advisor should you require specific tax advice.
You should know that if you withdraw funds for non-qualified health care costs, they will be taxed at your income tax rate. Plus, you’ll incur a 20% tax penalty if you’re less than 65 years old.
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: