What is a Health Savings Account?
A Health Savings Account, or HSA account, is a savings account where you can deposit money on a pre-tax basis to pay for qualified medical expenses. The list of qualified Medical Expenses is huge, and I often find myself surprised by what I can pay for using money from my HSA. More on that a little later.
Can anyone open a Health Savings Account?
Yes, but you may only contribute money to your HSA if your Medical Plan is a High-deductible health plan or an HSA qualified plan.
So, I can deposit $10,000 dollars a year in my Health Savings Account?
That would be nice to have $10k to put in my HSA this year, however the IRS sets up yearly limits and it typically changes from year to year.
Yearly Limits Set By The IRS
Where can I open a Health Saving Account?
Most banks or credit unions offer HSA Accounts and are typically very easy to open. Some employers require you to use a bank of their choosing, so be sure to pay close attention to this information at open enrollment, and ask your Human Resources department if your organization's preferred HSA host is not clarified.
Who can deposit money into your Health Savings Account?
This could be your mother, your brother, your aunt … the list goes on. Some employers can directly deposit pre-tax money into your Account. This is typically done every pay period. Oh, you can also deposit your own money!
Can I deposit money from my checking/savings account directly into my Health Savings Account?
You most certainly can. There are times I have exhausted my Health Saving Account with the pre-tax dollars my employer deposited however I know I have a medical bill that I need to pay. Since I will want to pay that bill from funds in my HSA I’ll need to add money to it. You can move money from your checking or savings account into your HSA but be mindful of these 2 important details:
1. The money you just added from your checking/savings account was not pre-taxed
2. You still must adhere to the yearly limits set by the IRS (see chart above).
How do I get tax credit on the money I deposited post-tax?
So, you moved money from your checking/savings account into your HSA to pay a medical bill or purchase products on the qualified list of medical expenses. Smart move! Keep track of how much money you deposit and when you deposited it. When it’s time to do your taxes, you can account for that money. Best to consult your accountant or tax consultant.
Does your Health Savings Account ever expire?
Heck no! That’s the beauty of it. You don’t start at $0 at the beginning of every year. It’s not your employer's account, it’s your account. However, if you no longer have an qualified high-deductible health plan or HSA qualified plan, you can no longer deposit into that account. Let’s say you or your company has an HDHP plan one year, but a standard co-pay plan the following year. You don’t lose that money; you can still use it to pay for those qualified Medical Expenses, but you just can’t deposit money in that account.
Seriously, I can use my HSA money on that?
One great thing about Health Savings Accounts is that the list of qualified medical expenses is vast. You’ll even see pharmacies and online retailers indicating that a product is HSA qualified. In addition to paying for your medication, doctor co-pays, etc…. there are some surprising items you can use your HSA to pay for everyday and not-so-everyday items.
· Cold Medicine
· Chiropractor Visits
· Pain Relievers
· Sinus Medication
Let’s wrap it up!
These were just a few highlights of Health Savings Accounts. I’ve had a High-deductible health plan for at least 12-15 years. Like many things I wish I knew more about how to best use my HSA when I first had it. Good thing that it’s never too late. Don’t be afraid to ask questions. Call your broker or call your insurance carrier. Most insurance carriers will have brochures or online material and links to Health Savings Account materials.
"Knowledge is knowing a tomato is a fruit.
Wisdom is not putting it in a fruit salad." - Unknown, but really smart!
Article written by Brad Lindemann | email@example.com
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