What is an HSA?
April 20, 2017
Understanding Health Savings Accounts (HSAs)
Medical expenses are a part of life. Your insurance plan probably won’t cover every single cost of every single appointment, exam, or procedure you and your family have done each year. But did you know there’s a way to save for future health care expenses and reduce your tax bill, now and in the future? Putting money away in a Health Savings Account, or HSA, is the way to do it.
What’s an HSA And What Are the Advantages of Using One?
Like a 401k or other retirement account, an HSA is a unique type of investment option that lets you put away up to a certain amount of money tax-free each year. The difference is that deposits made to an HSA are meant to be used specifically for healthcare costs. This includes:
- Medical, dental, and vision expenses
- Prescription drugs
- Medical supplies and equipment
- Other items, from Acupuncture to X-rays.
You won’t pay taxes on any withdrawals from the HSA for qualified medical expenses, either. At the end of the year, any funds you have left roll over to the next year. HSA accounts can earn interest – another advantage over putting away medical funds in a regular savings account – and can even be used to pay for medical expenses you run into during retirement. Investing in an HSA over time can help you build up an emergency fund for unexpected health costs.
Do I Qualify For an HSA?
In order to open an HSA, your health insurance needs to be considered a “High Deductible Health Plan.” What’s that? It’s a health plan with a deductible of at least $1,300 for self-only coverage, or $2,600 for family coverage. If you don’t have health insurance that qualifies today, it may be worth looking into, as these kinds of plans can sometimes have lower monthly premiums than traditional insurance plans.
How Much Can I Put in My HSA Each Year?
There are annual limits on deposits into an HSA, and they increase with cost-of- living adjustments as the federal government sets them. For 2017, the limits for an individual account are $3,400 if your medical insurance only covers yourself, and $6,750 if you cover your family as well. If you’re 55 or older, you can deposit a “catch-up contribution” of an extra $1,000 during the year. Because these contributions aren’t counted for tax purposes, they’re a great way to lower your family’s taxable income as well.
| HSA Contribution Limits | ||||
| Year | Self-Only Coverage | If age 55 or Older | Family Coverage | If age 55 or Older |
| 2017 | $3,400 | $4,400 | $6,750 | $7,750 |
Others, like your employer, can also contribute to your HSA if they desire. And, you keep your funds if you retire or change jobs.
How Many People Use HSAs Today?
HSAs have been around since 2004, and the use of them has grown rapidly over the past several years. As of 2015, almost 20 million Americans had insurance plans that were eligible for HSAs, and about 16 million of us are already taking advantage of health savings accounts.
What’s the Best Way to Get Started?
Talk to us. We can help you learn more about the benefits of health savings accounts and start saving today!