Thinking about contributing to a Health Savings Account (HSA)? Get a full understanding of its benefits before you begin.
Who Qualifies for an HSA?
- Must be covered under a high deductible health plan on the first day of the month
- Cannot be enrolled in Medicare
- Cannot be claimed as a dependant on another tax return
- Cannot have any other health coverage except
- Prescription drug plans
- Limited purpose FSA or HRA
- Suspended HRA
- Post- deductible health FSA or HRA
- Retirement HRA
What are the Tax Benefits?
- They are tax-exempt trust or custodial account
- Receive a tax deduction for contributions made even if you are not itemizing
- Contributions made by employer may be excluded from gross income
- Interest or other earnings in the account are tax free
- Distributions may be tax free if they are qualified medical expenses
What are Qualified Medical Expenses?
- Normal medical or dental expenses
- Drugs are considered qualified if they are prescribed, over the counter that are prescribed, and insulin
- Only in specific circumstances are insurance premiums counted
- Contributions remain in your account until they are used
- They are “portable”- stays with you if you change employers or leave the work force
- Can be established by self-employed or unemployed
- At age 55 or older an additional $1,000 is added to the contribution limit