A Health Savings Account (HSA) is an account that allows people with high-deductible insurance plans the ability to fund medical expenses up to the maximum deductible amount.
If you’ve ever thought about changing your insurance policy, This is a viable alternative.
The availability of Health Savings Accounts according to www.healthcare.gov/glossary/health-savings-account-hsa/ started becoming legal and pre-eminent in 2004, thus allowing people with high-deductible insurance policies to set aside tax-free funds for medical expenses up to the
maximum deductible amount.
But, if you don’t use the funds, it rolls over every year till you clock 65 years of age at which they are no longer needed for medical expenses(since you’re now eligible for Medicare), although you certainly can withdraw funds under the same conditions as a regular IRA(Individual Retirement Account).
HSA Before 65
If before turning 65, you use the funds for non-medical purposes, you will be penalized; you can, however, use the money for vision care, alternative medicine, and dental care.
Health Savings Accounts are a sure way to ensure income whilst providing tangible insurance coverage. You should consult your insurance agent for details involving the management of your insurance needs.
HSAs Tax Benefits 2023
– Your Money grows tax-deferred: You don’t have to pay any annual taxes on capital gains, interest income, or dividends that happened around your account.
– 100 percent tax-free on all withdrawals used to pay for qualified healthcare expenses.
– Help you grow a good retirement nest egg
Where Can I Register Health Savings Account
They are various financial companies(Banks, credit unions, and insurance companies) that can set up an HSA account for you, but they all have specified plans to offer. I will advise you to talk to your bank and, ask for their HSA account plan, also the same to brokers.
You can open an HSA account with Chase, Optum, Fidelity, and Bank of America. These are the banks I know of.
What Is HSA Account Limits 2023
- HSA Limit is $3,550 compared to $3,500 in 2019.
- HSA families Limit 2020 is $7,100
Health Savings Account Rules
It’s important to be aware of the following Health savings account (HSA) rules
HSA Eligibility Requirements:
– You must be enrolled in a high-deductible health plan (HDHP) before you can be eligible for an HSA.
– You cannot be covered by any other health plan that is not an HDHP, including Medicare or another non-HDHP plan.
– You cannot be claimed and also as a dependent on another’s person’s tax return.
HSA Contribution Limits:
– Contribution limits are set yearly by the IRS. For 2023, the annual contribution limit for people with self-only coverage is $3,750, and for those with family coverage, it is $7,500.
– Catch-up contributions of an additional $1,000 per year are allowed for seniors(aged 55 or older)
– Contributions can be made by either the account holder or their employer or a combination of both.
Qualified HSA Medical Expenses:
– HSAs can be used to pay for different qualified medical expenses, like doctor visits, prescription medications, dental and vision care, and also some certain medical equipment.
– So, it’s important to ensure that the expenses are considered qualified under IRS guidelines to avoid tax penalties. Non-qualified expenses may be subject to a 20% penalty and taxed as income if withdrawn before age 65.
HSA Tax Advantages:
– Contributions to an HSA are tax-deductible, meaning they reduce your taxable income for the year.
– The funds in an HSA grow tax-free, and withdrawals used for qualified medical expenses are tax-free as well.
– Any interest or investment gains that are earned within the HSA are not subject to taxation.
HSA Portability:
– HSAs are portable, meaning the funds remain with you even if you change jobs or health insurance plans.
– You can continue to use the funds for qualified medical expenses, and also any remaining balance carries over from year to year.
HSA Record-Keeping:
– It’s essential to keep accurate records of your HSA contributions, withdrawals, and also receipts for qualified medical expenses.
– This documentation will help in substantiating the use of HSA funds for qualified expenses during tax filings or in case of an IRS audit.
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