Created in 2003, Health Savings Accounts are best known as HSAs. A Health Savings Account is designed as a tax-exempt fund that works like a regular bank saving account. Contributors and employers make deposits into this fund and the contributor may withdraw it for reimbursement of certain medical expenses.
Benefits of an HAS
HSAs are a good idea for many reasons, a few of them include
* You are in complete control of how much money you are going to invest in the HSA to use for future medical costs.
* Your employer will also be contributing to the HSA along with you, creating more invested money than just what you put in.
* You also have control over how and when the money in the program is used.
* Money that is invested in an HSA is pre-tax income, meaning that it will reduce your tax owed.
Downfalls of an HAS
There are a few risks associated with health savings account to go along with the benefits. These include:
* Those who needs HSAs the most, the chronically sick or the elderly, aren’t as equipped to put money aside for their medical expenses.
* Sickness is not something you can really plan for and you may not have estimated your medical needs as well as you thought.
* Money withdrawn from the HSA for things that aren’t medical expenses can be taxed.
* Money withdrawn from the HSA when you are under the age of 65 will be taxed and have a penalty fee of 10 percent assessed.
How to Qualify for a Health Savings Account
To be able to sign up for a HSA, you must qualify. There are many qualifications for a Health Savings Account, including not being on Medicare and having no other health care (except for rare certain exemptions) You must have a high-deductible health plan coverage (or HDHC) by the month’s first day, and not being anyone’s dependent. If you are eligible for an HSA by the first day of the tax year’s last month (December 1st for the majority of tax filers), you are said to be eligible for the entire year. Keep in mind you are not able to contribute to an HSA of someone else, only your own account. Joint accounts, even for those married, are not allowed. Who Can Contribute to an HSA and How
You are going to be able to get a HSA through your bank or employer if they are offering a high-deductible health care plan. You will need to be under 65 years of age, not be anyone’s dependent, and only be covered by that one HDHC. No other medical insurance policy can be covering you. There are some insurance policies that do not count toward this, including insurance for a disability, long-term care insurance, vision insurance, and dental insurance. Your employer is able to contribute into your HSA as well, but the combined contribution between you and your employer must still be under the limits of the account. Currently, that limit is $3,000 for individuals and $6,000 for a family covered. When money is not used in the HSA, it will roll to the next year. You do not forfeit any cash contributed into the fund
Health Savings Accounts are a good way to help pay for high medical bills that a high-deductible insurance policy does not pay. While the money in the plan is not taxed, putting in the maximum limit is a good way to save money for future medical expenses.