A Health Savings Account (HSA) is a tax-advantaged savings account designed to help certain individuals save money for medical expenses. Here are some key features and benefits of HSAs:
- Tax Advantages: Contributions are tax-free/deductible and withdrawals for medical expenses are tax-free.
- Flexibility: HSA funds roll over from year to year and grow tax-free. The funds can be spent on qualified medical expenses or invested in various financial investments.
- There is a limit as to how much can be contributed to an HSA and it changes every year.
- In 2023, $3850 for self only coverage; $7750 for family coverage. Those over age 55 may contribute an additional $1000.
- Portability: The account is owned by the employee/individual, even if you change jobs or health insurance plans.
- Control and Choice: HSAs offer control over healthcare decisions and can be used for a wide range of medical expenses. (Copay, Dental appointments, eye glasses, etc.)
- Long-Term Savings and Retirement: Once you reach age 65, you can use the funds for any purpose without penalty (non-qualified withdrawals are subject to income tax).
It’s worth noting that to be eligible for an HSA, you must have a high-deductible health insurance plan, meet certain IRS criteria, and not be claimed as a dependent on someone else’s tax return. Here is a website with a full list of HSA eligible purchases.