What’s the BIG deal about Health Savings Accounts and how do they work?
Recent legislation that impacts the healthcare industry has sparked much interest in Health Savings Accounts or HSAs. Per Wikipedia, HSAs are a tax-advantaged medical savings plan available to U.S. taxpayers enrolled in a high deductible health plan. Some employers also allow one to contribute to an HSA by taking funds pre-tax straight from your paycheck. However, you are able to open an HSA on your own as well if you participate in a high-deductible plan and your employer does not offer this option. HSAs usually come with a debit card for use only on medical expenses to keep in the good graces of the IRS. Funds contributed grow free of tax and are not taxable at withdrawal if used for qualified medical expenses. In this way, they are similar to a Roth IRA. Another bonus is the funds roll over each year if unused – these accounts act as a savings account in a way! There is an annual contribution limit, and for 2018 the limits are as follows:
- Single - $3,450
- Family - $6,850
One thing to note however is, to open an HSA account, you cannot be eligible for Medicare and/or cannot be claimed as a dependent on someone else’s tax return. Health Savings Accounts are a great way to start saving for future healthcare related expenses!