HSA Account: What is it? Who qualifies?
What is an HSA account?
A Health Savings Account (HSA) is a tax-free savings account for medical expenses. You can only pair an HSA account with a high deductible health plan, and withdrawals used to pay for health-related expenses are completely tax exempt. If you have a high-deducible plan, an HSA account is a great way to reserve funds for a time when you might have big medical bills and want to avoid being hit with taxes on that amount.
A Health Savings Account is set up separately from your other bank accounts and allows you to set aside money for medical expenses that you incur after you open the HSA account. Your funds roll over year-over-year, if you don’t use them, and the money can be invested in the meantime to build more savings.
Pretty cool, right?
What is an HSA account used for?
It is important to remember that these accounts can only be used for "qualified medical expenses". This includes things like doctor visits, prescription drugs, medical supplies or other expenses related to your treatment plan. If you use your Health Savings Account for non-qualified expenses (like , you will generally pay income tax on the amount used, plus get hit with an additional penalty tax for making a non-qualified withdrawal.
Can I open an HSA account with any health plan?
No, you must have a High Deductible Health Plan (HDHP) that meets that following criteria for 2017:
For an individual plan:
- $1,300 deductible (or higher)
- $6,550 out-of-pocket maximum (or less)
For a family plan:
- $,2600 deducible (or higher)
- $13,100 out-of-pocket maximum (or less)
Is there an HSA account contribution limit?
Unfortunately, the IRS sets some limits to how much you can save in your HSA. For 2017, these limits are
- $3,400 for an individual
- $6,750 for a family
However, if you are 55 years or older, you are in luck! The IRS lets you add an extra $1,000 to these figures.
Have more questions about HSAs?
Stride is here to help you understand your health insurance and savings options. Comment with questions below or email us at firstname.lastname@example.org.