A health savings account (HSA) is a tax-advantaged medical savings account available to individuals in the United States that are covered by a high-deductible health plan (HDHP). The funds placed into an HSA account are not subject to federal income tax at the time of deposit. HSA accounts are available through many banks and can be an important factor in a consumer’s overall financial wellbeing.Many people are feeling a tax time pinch due to recent changes to the tax code.
Seeking out new ways to reduce your tax burden in the future can help to make next year’s tax time less of a burden. A health savings account, established through your insurance company, employer, or local bank, may be just the ticket. In addition to investing in things like your company’s 401K and insurance programs, an individual can also contribute tax-free money towards an HSA that may be used for medical expenses, contributing to their overall financial stability.
You can only qualify for these savings plans if you are enrolled in a recognized high-deductible health plan, and if you are not covered by Medicare, nor can you be claimed as a dependent on someone else’s taxes. Some high-deductible insurers offer health savings accounts through their health savings account bank company, but you can also establish an account on your own at a local bank. Some employers offer health savings account programs, or incentives for establishing an HSA through their overall employee benefits package.
The benefits of establishing such an account are that a portion of your annual income becomes tax exempt, as long as you only use these funds for approved medical expenses. Enrolling in a HDHP reduces the monthly premium expense of climbing health insurance. The drawback of an HDHP, of course, is higher deductibles and copays. An HSA, therefore, can be an important tool toward covering these expenses.
Another benefit is that an HSA can be used for things that are often not covered by insurance plans, like chiropractic care, durable medical goods such as wheelchairs, fertility treatments, or even dental expenses.HSA funds often can be rolled over to the next year, should you find that your #FaceBook expenses do not use up all of the money in the account during the calendar year. You can view an HSA as a plan to save for future medical issues, not just current needs. If you should change your HDHP, an HSA offers portability, and can be applied to expenses occurred with the new plan.