Health savings accounts (HSAs) are tax-advantaged savings accounts offered to individuals with high-deductible health plans to save for qualified medical expenses. Click here for a list of expenses that you can use your HSA for.
The money deposited into your HSA can either come out pre-taxed from your group benefits or for an individual, deposited directly into the account, reducing your taxable income at the end of the year. However, there are yearly contribution limits for how much you can put in your HSA account. In 2022, you can contribute up to $3,650 in your HSA as a single person and up to $7,300 as a family.
There are several benefits to an HSA fund:
- You can claim your contributions that you or someone else makes to your HSA as a tax deduction. Keep in mind, though, you cannot claim a tax deduction for any amount your employer contributes to your HSA.
- Your HSA funds roll over from year to year if you don’t spend them.
- HSA funds are also considered “portable.” Once you have an HSA, you can continue to contribute to the HSA account if you have a qualified health plan. If you decide to go with a traditional plan, you would no longer be able to contribute to your account. However, you will still be able to use the money already in your account for qualified medical expenses.
- Individuals aged 55 and older can contribute and extra $1,000 to their account in 2022 as an “catch-up contribution.”
However, there are also a number of things to consider before deciding to open an HSA:
- The plan will have no first dollar coverage, which means your plan will have specific copays and out-of-pocket expenses required before coverage begins.
- HSA plans require a high-deductible health plan, which means having to spend more money before your coverage kicks in.
- Additionally, not all high-deductible health plans are HSA compatible.
- You cannot pay your premiums with money from your HSA.
- You cannot have an HSA with any Medicare plan, but you can use leftover dollars on medical expenses though.
There are various benefits to an HSA plan, but there is also plenty to consider. Contact your ARC representative to find out if this savings account is right for you, your budget, and your situation.