Starting To Use Your HSA

An Example: Isaac Davis is opening an HSA

When Isaac signed up for the High Deductible Health Plan, he chose the option to open an HSA.

He next received an email notifying him that he could open his account by going to:

He clicked the link and started registration. After setting up his username and password, he reviewed the terms of opening the HSA and made sure he was eligible to open and contribute to the account. He noted that Tango’s phone number was listed in case he had questions. During the final step, he electronically signed his application and it was sent to the bank. He received an email that his account opened the next morning. Soon, he will receive a debit card and welcome kit in the mail.

How do I open an HSA?

Tango Health will guide you through this process. First, your employer will notify Tango Health that you want to open an account. Next, you will either receive an email from Tango Health encouraging you to register online or your employer will notify you when it’s time to go to our website: Once you finish registration your account will be opened and ready for contributions.

How do I put money in my HSA?

In order to contribute money to your HSA before taxes it has to go through a Cafeteria Plan (an employer system that allows tax advantaged benefits from paychecks, including healthcare premiums and your 401(k) plan). This means you have to make payroll deductions. All contributions to your HSA through a Cafeteria Plan are not subject to payroll taxes and federal income taxes. They also will not be included in your taxable income. Furthermore, interest or earnings on the money can be earned tax free in most states.

How much money can I contribute to my HSA?

Your contribution limit for any given year will depend upon when you become eligible, the type of insurance coverage you have and your age.

Single Only Family Single Over 55 Family Over 55
2012 $3,100 $6,250 $4,100 $7,250
2013 $3,250 $6,450 $4,250 $7,450

If you have questions about your contribution limit you can call an HSA expert at Tango Health or consult the IRS Form 969. The chart above is a general guideline for contribution limits but the numbers are not accurate for all situations.

You can also learn more about factors that impact your personal contribution limit by reading our blog post, Why Each Employees Contribution Limit Matters.

How much should I contribute to my HSA?

Fortunately, Tango Health’s software allows you flexibility when you contribute to your HSA.

If you want to get the most from your HSA, you should contribute the maximum allowed each year. People that are Savers contribute the maximum allowed by law. They lower their taxable income, save payroll taxes, save income taxes and sometimes have tax free earnings from the savings in their account. These people achieve the highest level of savings from their HSA.

People who are Yearly Planners often contribute an amount from each paycheck into their HSA. This strategy allows them to build their HSA savings over time. They also lower their taxable income, save payroll taxes, save income taxes and sometimes have tax free earnings from their savings. Then when they have expenses they can easily use their HSA debit card to pay for them. While they don’t maximize the HSA savings benefit, they still have the opportunity to realize significant savings..

Most people don’t think about their HSA until they have an expense. Tango Health’s patented Flex Reserve® makes it easy for people that don’t contribute to their HSA to realize financial benefits.. They can continue receiving the same amount as always in their paycheck, while also receiving a small tax advantage when they reimburse themselves for the eligible expenses they have.

If you still aren’t sure, take our quiz: How Much Should I Contribute To My HSA?

When can I use my HSA?

Your Health Savings Account can be used to pay for qualified medical, dental, and vision expenses, including COBRA premiums, Medicare premiums (i.e. Part A, Part B and Part D), or long term care insurance premiums.

These expenses can be incurred by a spouse or any tax dependent. It doesn’t matter if your spouse or children are on your insurance. You can even use your HSA after you incurred the expense by paying out of your own pocket and then reimbursing yourself from your HSA to earn the tax break.

What are eligible medical expenses?

IRS Publication 502 lists qualifying and non-qualifying expenses for tax deduction purposes which may be reimbursed (unless otherwise indicated) under most Health Savings Accounts. If you have any questions, contact us. See sidebar list for examples.

If you withdraw money from your Health Savings Account to use for other reasons, you will be subject to income tax on the amount of the withdrawal. In addition, you may be subject to an additional 20% penalty tax if you are under age 65. If you have done this you should consult a tax expert or call Tango Health.

Qualified Medical Expenses

  • Doctor office visits
  • Smoking cessation programs
  • Dental care and braces
  • Physical therapy
  • Prescriptions
  • Psychological counseling
  • Prescriptions
  • Birth control and vasectomy
  • Chiropractor
  • Transportation expenses
  • Acupuncture
  • Bandages and crutches
  • Hearing aids
  • Breast pump and nursing supplies
  • Long-term care
  • Glasses, contacts, LASIK surgery

How much do I save in taxes with an HSA?

The amount you save in taxes will depend on whether or not you make pre-tax or post-tax contributions and how you spend the money from your HSA. Individuals that make pre-tax contributions to an HSA and then spend the money on eligible medical expenses will save the most. Using the process will avoid all taxes, including taxes on income, payroll, interest and earnings. Post-tax contributions will not avoid payroll taxes. Using money in an HSA for non-eligible expenses will not avoid any taxes and will incur a penalty unless the individual is over 65 years old. Individuals that are 65 or older will only pay income taxes on amounts spent from their HSA on non-eligible medical expenses.

To learn more about how pre-tax and post-tax contributions work, see our blog post: Who Is Eligible To Make Pre-Tax And Post-Tax HSA Contributions.