A Health Savings Account, usually referred to as HSA, is a great thing; but they are not for everyone. To determine if an HSA is a good fit for you, you first need to take a look at what kind of health insurance coverage you have. To be eligible to contribute to an HSA you need to have an HSA-eligible high-deductible health plan that satisfies the annual deductible and out-of-pocket expense limits. In addition to having HDHP coverage you cannot be covered by another health plan (with limited exceptions), you cannot be enrolled in Medicare, and you cannot be eligible to be claimed as a dependent on another person's tax return.
One of the most significant benefits of having an HSA is that your contributions are tax-deductible, (there are limits to how much can be contributed depending if it is self or family coverage and if you are 55 or older). Some other benefits are that your balance is carried over from year to year; it's your money and you do not lose it if you do not need to use it. The earnings are tax-deferred and distributions (if qualified) are tax-free. If you are fortunate and do not need to use the money for medical expenses, it can also be an additional source of retirement income.
Some people have said that an HSA is the best of both worlds. An HSA can help you to get a handle on rising healthcare costs but also provide a tax-advantaged way to save.
Have questions or need help setting up your HSA? Contact us today!
