Health Savings Account (HSA)
Candlefocus EditorIn order to be eligible for an HSA, you must be enrolled in an HDHP. An HDHP plan must have a lower deductible than a traditional co-insurance health insurance plan and many require a co-payment for typical medical expenses. You must also be over the age of 18 and have no other health coverage that disqualifies you from making contributions to an HSA.
For 2020, the maximum annual contribution limit for an individual's HSA is $3,550 and $7,100 if you are covered by a family plan. Contribution limits are subject to an inflation adjustment each year and may be adjusted by your employer. The contributions of both you and your employer are also tax-deductible.
The money in an HSA can be used to pay for qualified medical expenses such as doctor visits, hospital stays, prescription drugs and other healthcare-related services. Some caregivers and dental work can also be qualified medical expenses. Any HSA funds that are not used in the current tax year can be rolled over to the next year with no penalty. All of the money in an HSA is also yours to keep, even if you switch jobs or health plans.
HSAs have a number of benefits in addition to the tax-deductible contributions. They offer an easy way to save money for medical expenses, and the money can be used tax-free for qualified medical expenses. The account is portable, so it goes with you wherever you go. Furthermore, an HSA is an excellent retirement savings option, as it allows you to save for your future healthcare costs in a tax-advantaged account.
Whether you’re currently a member of an HDHP or considering one, an HSA offers an excellent way to save for current and future medical expenses. It’s important to remember that HSAs are only available if you’re enrolled in an HDHP, so be sure to check if your plan qualifies before attempting to open an account.