HSA - Health savings account
HSA is a type of savings account that can save you on your overall healthcare costs. Health savings account has a few great tax benefits that you may want to consider. We will break it down for you, so you can start save 💸.
Table of Contents
What is health savings account
HSA is a type of saving account that allows you to set aside pre taxed dollars for qualified medical expenses. Using the non taxed money in your account towards things like your deductible co pays and coinsurance, will save you overall as your dollars worth more when uncle Sam is out of the picture.
Who can open an account
To open health savings account you need to choose a high deductible health plan(HDHP). Even though that might not sound like the greatest plan at that point, there are great tax benefits that could make this option very attractive to you.
- You need to choose High deductible health plan (HDHP) to qualify.
- You need to make sure with your insurance company that the high deductible plan is HSA eligible before opening an account.
- Your funds will roll over every your.
How HSA works
Health savings account has some tax benefits that you can use to maximize your dollars when you spend money out of for qualified medical expenses.
- You don’t pay taxes on money you setting aside in the HSA.
- You don’t taxes on the funds you pull from the account to pay for qualified medical expenses.
- You may earn intrest on the money in the HSA , your earning are not taxable.
This can lower your overall cost on healthcare. But keep it mind, HSA can backfire on you if you don’t use it for medical expenses. It will trigger taxes on the funds you use and you will pay a penalty for early withdraw.
What are qualified medical expenses
In short words, medical bills this include your deductible, co pays, coinsurance, prescriptions drugs and more.
Here is some common once:
Considered as qualified expense:
- Your out of pocket expenses on your high deductible health plan.
- Most dental and vision procedures.
- Prescription drugs.
- Laboratory fees.
- Medical emergencies.
- Hospital stay.
- Medical equipment like cane and wheelchairs.
- Certain types of Over-the-counter medications.
Not considered as qualified expense:
- Cosmetic surgery.
- Lotions or other cosmetic products.
- Baby care products like oil and wipes.
Please not: This is not a complete list, to learn more about all qualified medical expenses plea visit the IRS website.
Limits on contribution
HSA is a great savings tool. But like any other tax free savings accounts, it comes with limits of how much you can contribute every year.
- For individuals up to $3,650. (For 2022)
- For a family up to $7,300.
What if you cancel your health plan
If you cancel your high deductible savings account you may not contribute anymore to your HSA. However, you can keep use the money in the account to pay for qualified medical expenses.
How to open an account
You have many options of how to open an account:
- Some insurance company offers HSA.
- Banks and online banks.
- Investment firms.
The information on this page is only for general education purposes . We do our best to audit our blogs periodicity and make sure information is accurate and up to date.