A health savings account (HSA) is an account associated with high-deductible HMOs and PPO plans that allows you to use pretax dollars to pay your share of eligible costs for medical, prescription, dental, or vision services that are not covered under your insurance plan. By using the untaxed dollars in your health savings account (HSA) to pay your deductible, copayment, coinsurance, and certain other expenses, you can potentially reduce the overall cost of health care. Your HSA is owned by you, so you can use money in the HSA to pay qualified medical expenses for life – including retirement. As long as you are using the HSA money to pay for eligible health care expenses, you do not pay taxes when you withdraw it.
Funds in your HSA can be used for eligible medical expenses not covered by your health insurance plan, and they can be saved for future expenses on a pre-tax basis. You can contribute funds into an HSA on a pre-tax basis to save for current and future medical expenses, giving you control over how your healthcare dollars are spent. Your HSA balance can grow throughout the years, earning interest to create savings you can use to pay for health care when needed. You also can elect to invest part of your HSA balance as soon as you reach $1,000 of balance in the account.
You cannot make any further contributions, but you can use your HSA to pay for qualified expenses. You may use your FSA to cover eligible medical expenses at the beginning of the year, provided that you anticipate contributing as much as is needed to cover these expenses at years end. You can have a limited-use Health FSA that allows you to only pay qualified vision, dental, and after-deductible expenses. A enrollee cannot be in both the HSA and regular health care FSA at the same time, though an FSA may be converted into a permissible limited-purpose flexible spending account (LPFSA).
If you are contributing to an HSA, you cannot participate in a health care Flexible Spending Account (FSA), such as one offered through TexFlex. HSA holders can contribute to a LPFSA for dental and vision expenses, and to a Dependent Care FSA for childcare costs. A qualified distribution of HSA funds is not included in your income, is not deductible, and reduces the amount you may contribute to your HSA. For example, SEP IRAs or SIMPLE IRAs are carried over if the employers contributions are made in a plan year ending on or during the tax year that would have been made by the distribution.
An individuals direct contribution to an HSA is 100% deductible against an employees income. You can claim a tax deduction on contributions that you, or someone other than your employer, makes to an HSA. Want to save money on taxes by contributing to your HSA via pre-tax salary deduction. An HSA is a tax-advantaged account, meaning the money you contribute is tax-free.
As long as you use money in an HSA for medical expenses that the IRS considers to be deductible, that money is tax-free. Every dollar you keep in an HSA is a dollar you are not taxed. Even if you switch healthcare options down the road, you will still have access to money in your HSA. You can use your HSA for eligible expenses, even if you switch to another health plan or change employers.
Not everyone can–or should–sign up for the type of health insurance plan required for an HSA. To be eligible for savings from an HSA, you have to be signed up for a high-deductible health insurance plan, or HDHP, as defined by the government. You may use the money from your HSA to help you pay for health coverage purchased through COBRA, or pay health insurance premiums if you receive unemployment payments. An insured person may take out the money that has been saved in the HSA to pay any extra health care expenses.
HSA funds may cover deductibles, copayments, and coinsurance, over-the-counter medications, feminine hygiene products, and other eligible medical expenses that are not covered under the plan. You may still use the funds in an HSA to pay qualified medical expenses, but contributions to the account may no longer be made unless you enroll in another HDHP that is HSA-eligible. The amount that you or anyone else may contribute to your HSA depends on what kind of HDHP insurance you have, your age, when you became an eligible individual, and when you stop being an eligible individual. If the designated beneficiary is not the spouse of the account holder, the HSA plan is no longer treated as an HSA, and the beneficiary is taxed at the fair market value of the account, adjusted for any qualified health expenses the decedent paid with the account during the year after the date of death.
An HSA plan may be transferred tax-free to the surviving spouse when the account holder dies. Either parent may use HSA funds to pay their childs qualified expenses, according to the IRSs regulations, and it does not matter which parent counts the child as a dependent for income tax purposes, or which parent retains physical custody. After age 65, you may take out HSA dollars to pay any expenses — you just have to pay the income taxes.
Voluntary Employee Benefits Association medical expenses plan (VEBA MEP), unless converted to a Limited Health Reimbursement Account (HRA) Coverage. Another medical plan that is not a qualified IRS high-deductible medical plan–for example, in a spouses plan or domestic partnership plan registered with the government–unless the medical plans coverage is a limited-benefit coverage, such as dental, vision, or disability insurance. A Health Savings Account (HSA) is a tax-advantaged individual savings account that helps individuals who have an HDHP (high-deductible health plan) save money on many out-of-pocket health expenses, such as physician visits, vision and dental services, and prescriptions.