A Health Savings Account (HSA) is one of the most cost-effective and efficient ways to plan for medical expenses, now and through retirement. Why? Because an HSA is a triple tax advantaged account.
You pay no tax on contributions into your HSA or earnings made on funds from your HSA. You pay no taxes on withdraws from your HSA when used for qualified medical expenses.
Your HSA allows for reimbursements for qualified medical expenses. There are two ways to pay for or be reimbursed for your expenses. They include:
To sign up, just follow the steps below. Please note that your employer will need to be contracted with us for you to enroll. You must also be enrolled in an HSA-qualified HDHP.
Health expenses are a significant part of your financial journey and enrolling in a health savings account (HSA) can be an ideal way to help you prepare for those costs, while also taking advantage of the many benefits of an HSA (like tax-free purchases on eligible expenses).
The only problem?
Understanding how an HSA works, or how to use it in a way that makes sense for your lifestyle and financial goals can be tricky. Luckily, you can use My HSA Planner https://myhsaplanner.com/BHS to not only learn more about HSAs, but to get a personalized recommendation on how to contribute to it!
Whether or not you already have an HSA, this easy-to-use tool has a quiz that will help you learn:
Check it out today https://myhsaplanner.com/BHS and get your personalized HSA recommendations to see if an HSA is right for you.
To qualify for an HSA, you must be:
Exceptions. The other health insurance does not include coverage for accidents, dental care, disability, long-term care and vision care. Workers’ compensation, specified disease and fixed indemnity coverage are permitted.
For 2021, the IRS contribution maximum is $3,600 for an individual and $7,200 for a family . For 2022, the IRS contribution maximum is $3650 for an individual and $7,300 for a family. HSA holders age 55 and older get to save an extra $1,000. These contributions are 100% tax deductible from gross income.
The health insurer or your employer can verify the status of your coverage. In addition, the words “qualifying (or qualified) High Deductible Health Plan” or a reference to IRC (Internal Revenue Code) Section 223 will be included in the declaration page of your policy or in another official communication from the insurance company. An HDHP is a health insurance plan that generally does not pay for the first several thousand dollars of healthcare expenses (i.e., your “deductible”), but will generally cover you after that.
It is important when choosing your HDHP that your insurance carrier verify and guarantee that the HDHP meets IRS regulations to ensure your HSA is qualified.
Both HSAs and FSAs allow you to pay for qualified medical expenses with pre-tax dollars. One key difference, however, is that HSA balances can roll over from year to year, while FSA money left unspent at the end of the year is limited to a $500 carryover to the following plan year or a grace period. You may choose to use a limited-purpose FSA to pay for eligible healthcare expenses and save your HSA dollars for future healthcare needs. You may use limited-purpose FSA dollars to reimburse yourself for expenses not covered by your High Deductible Health Plan, such as:
There are three kinds of tax-favored contributions, including:
All three forms of contributions are exempt from federal income taxes. Employer and salary reduction contributions (section 125 cafeteria plan) are exempt from FICA and FUTA, as well.
No, this would be a nonmedical withdrawal, subject to taxes and penalty.
Exceptions. No penalty or taxes will apply if the money is withdrawn to pay premiums for:
Your HSA is portable. This means that you can take your HSA with you when you leave and continue to use the funds you have built up. Funds left in your account continue to grow tax-free. If you are covered by a qualified HDHP, you can even continue to make tax-free contributions to your HSA.
Distributions from your HSA used exclusively to pay for qualified expenses for you, your spouse or dependents, are excluded from your gross income. Your HSA funds can be used for qualified expenses even if you are not currently eligible to make contributions to your HSA.
Upon termination, you may be offered to leave your HSA in an account with your former employer or you may transfer it to another custodian. Maintenance fees may be charged by your former employer if you leave your HSA in place.
At age 65 and older, your funds continue to be available without federal taxes or state tax (for most states) for qualified medical expenses. For instance, you may use your HSA to pay certain insurance premiums, such as Medicare Parts A and B, Medicare HMO, or your share of retiree medical coverage offered by a former employer. Funds cannot be used tax-free to purchase Medigap or Medicare supplemental policies.
If you use your funds for qualified medical expenses, the distributions from your account remain tax-free. If you use the funds for non-qualified expenses, the distribution becomes taxable, but exempt from the 20% penalty. With enrollment in Medicare, you are no longer eligible to contribute to your HSA. If you reach age 65 or become disabled, you may still contribute to your HSA if you have not enrolled in Medicare.