How do HSA’s work?
Health Savings Accounts (HSAs) are tax-advantaged accounts designed to help individuals with high-deductible health plans (HDHPs) save for qualified medical expenses. Here's how HSAs generally work:
Eligibility: To open and contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP). HDHPs have specific deductible and out-of-pocket expense limits set by the IRS.
Contribution: You and/or your employer can contribute money to your HSA up to the annual limit set by the IRS. Contributions are tax-deductible, meaning they can be deducted from your taxable income.
Tax Advantages: Contributions to your HSA are tax-deductible, and any interest or investment earnings within the account are tax-free. Additionally, qualified withdrawals for eligible medical expenses are tax-free.
Withdrawals: You can use the funds in your HSA to pay for qualified medical expenses, including deductibles, copayments, prescriptions, and certain other healthcare costs. It's essential to keep receipts and documentation for these expenses.
Portability: Unlike flexible spending accounts (FSAs), HSAs are portable. This means you own the account, and it remains with you even if you change jobs or health insurance plans.
Investment Options: Some HSAs allow you to invest the funds in the account, potentially allowing for growth over time. However, not all HSAs offer investment options, and it depends on the provider.
Age 65 and Over: Once you reach age 65, you can withdraw funds from your HSA for non-medical expenses without a penalty. However, if not used for qualified medical expenses, these withdrawals are subject to income tax.
It's crucial to be aware of the specific rules and regulations surrounding HSAs, as they can change, and individual circumstances may vary. Consult with a member on our team for personalized advice based on your situation.