What is an HSA? What can I use an HSA for? Why should I open an HSA? These are all common questions when it comes to understanding HSA’s. Let me attempt to answer these questions for you.
An HSA simply stands for Health Savings Account. With the health care reform in full swing, more and more people are starting to explore their options for health insurance and are looking for ways to finance health related expenses. A health savings account is one option to consider IF you already have a high deductible health plan.
A health savings account is one way to accumulate money, which you can contribute from your paycheck, to help pay your insurance deductible for the year. You can also pay for other health related expenses with money from your HSA, including dental and vision. Here are some of the benefits of choosing an HSA:
- Tax deductible contributions– all of the money that you contribute to your HSA is 100% tax deductible (up to the legal limit)**
- Tax free– so long as the money that you withdrawal from your HSA is used for qualifying medical expenses, it will not be subject to tax
- Tax deferred– any interest earnings that accumulates as a result of HSA contributions are considered tax exempt**
- Does not expire – all of the money that you put into an HSA account is yours to keep and will continue to build year after year, so long as you aren’t depleting your account each year
- Can be less expensive- if you choose to enroll in a high deductible insurance plan, there is a possibility that your premium from each pay check will be smaller than if you had chose a traditional PPO plan
- Choices- you are able to contribute as much (within the legal limit***) or as little to your HSA as you wish
In order to qualify for an HSA, the insurance plan that you choose must have a deductible of $1,250 for an individual and $2,500 for a family (2014 minimums). Opening a health savings account isn’t right for everyone, but if you think that the benefits listed above outweigh your alternatives, we can help you sign up for one.
*To be eligible for an HSA, you must meet the following legal requirements: 1) be enrolled in a qualified high deductible health plan (HDHP); 2) not be enrolled in a health insurance plan other than a HDHP or another allowable plan; 3) not be claimed as a dependent on another person’s tax return; or 4) not be eligible for benefits under Part A or Part B of Medicare.
**The information contained herein is provided solely for informational purposes and does not constitute tax or legal advice. You should consult with a qualified tax or legal advisor with respect to questions regarding your HSA and qualified medical expenses.
***As of 2014, an individual under the age of 55 can make a maximum contribution of $3,300, and a family can contribute up to $6,550. For 55+, the maximum contribution should not exceed $4,300 for an individual and $7,550 for a family.
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