An HSA or Health Savings Account allows account owners to pay for current health care expenses and save for those in the future.
- Contributions to your HSA are tax-deductible. Why not make what you’re paying for your health care tax free? You have until the annual filing deadline to make contributions for the previous tax year. The best part is, you don’t have to itemize to claim the deduction as you write off the deposits on line 25 of your federal 1040
- For tax year 2018, the contribution limits are set at $3,450 if you have individual coverage and $6,900 for families.
- If you don’t use all the contributions you will receive interest and that interest earned is tax-free.
- When you take a distribution from your HSA you don’t pay any taxes as long as you’re using the money for qualified medical expenses (See IRS publication 502 for more details). If you decide to use HSA funds for something other than healthcare, you might have to pay regular income tax on the money along with an additional 20% tax penalty (This will change after age 65. See IRS publication 969 for more details)
- An HSA is The money in your HSA remains available for future qualified medical expenses even if you change health insurance plans, change employers or retire. Funds left in your account continue to grow tax free.
- Most HSAs issue a debit card, so you can pay for your prescription medication and other expenses right away. If you wait for a bill to come in the mail, you can call the billing center and make a payment over the phone using your debit card.
- You have to keep your receipts to prove that withdrawals were used for qualified health expenses.
What can I use it for?
Qualified expenses include most services provided by licensed health providers, as well as diagnostic devices and prescriptions. Allowable expenses are explained fully in IRS publication 502 Continue reading