Health Savings Accounts (HSAs) are personal financial accounts, like a checking account, but the money you put in can be tax-free. Your HSA can pay for medical, dental, vision and prescription health care expenses. Think of your HSA as a 25% coupon off all of your health expenses. New to HSAs? Need a refresher? You’ve come to the right place.
Start Here: Watch The HSA Education Basics Video
Why Do HSAs Exist?
Congress created HSAs for consumers as an incentive to take more financial responsibility for their health care costs. For the vast majority of services, consumers can decide where their money is spent. This is made possible through a higher deductible than traditional plans. An out-of-pocket cap and tax advantaged savings often result in lower healthcare costs and premiums for consumers.
What Are The Advantages of Using An HSA?
A Health Savings Account allows you to save money without paying taxes on the amount you save, the interest you earn on it or the amount you spend on qualified medical expenses. This can result in a large financial gain. Contributing the maximum amount allowed to your HSA can result in savings up to $2,150 a year.
Using pre-tax dollars to pay for expenses reduces your taxable income. At the same time, premiums are usually lower for High Deductible Health Plans than for traditional healthcare plans. Another consideration is that your employer may contribute to the Health Savings Account on your behalf. You do not pay any taxes on employer contributions to your account.
How Do I Become Eligible For An HSA?
The first step to being eligible to contribute to an HSA is enrolling in a High Deductible Health Plan (HDHP). These work similar to your traditional options except for a higher deductible and out-of-pocket maximum. However, some people may not be eligible for an HSA even if they enroll in the HDHP.
What Are Common Myths About HSAs?
If you’ve heard any of these myths about the HSA, then, you may want to learn more about the facts:
- Myth: You need to pre-fund the account to get the tax break.
- Myth: You can only change your payroll deduction once per year.
- Myth: People with single coverage can only use HSA for their own health expenses.
- Myth: Funding your HSA with after-tax dollars is just as good as funding it through payroll.
- Myth: If you don’t have group health insurance, you can’t fund your HSA through pre-tax payroll deduction.
- Myth: As of January 1, 2011, no over-the-counter products qualify for an HSA tax break.
All of the above statements just aren’t true. Here’s the truth.
I Understand, But How Do I Get Started?
We all have questions and will continue to have questions about HSAs. Here’s a few common things we hear from first-timers and veteran users – plus a link to some help: