What is a Health Savings Account?
A Health Savings Account (HSA) is a tax-advantaged savings account generated to help individuals save on medical expenses not covered in their health insurance plan.
(HSA) are available to individuals with a high-deductible health insurance plan (HDHP), a health insurance plan with lower premiums but higher deductibles and overhead expenses.
The primary purpose of a (HSA) is to provide a route for people to set aside funds to cover higher overhead expenses while also benefitting from certain tax advantages.
How Does a Health Savings Account Work?
Below is mentioned how a Health Savings Account Works:
- Engage in a High-Deductible Health Plan (HDHP): To be eligible for HSA, you must first enrol in a qualified high-deductible health plan (HDHP).
- Set up HSA: Once you’re enrolled in HDHP, you can open an HSA with a financial institution which offers them, such as a credit union. You can contribute your HSA directly via payroll deductions.
- Contribute to your HSA: You can contribute a certain amount yearly, set by the IRS.
- Use your HSA to pay for qualified medical expenses: You can use your HSA to pay for qualified medical expenses, including deductibles.
- Save Taxes: Contributions you made to HSA are tax-deductible; this can relieve your taxable income. Any income in the account is tax-free; withdrawals for qualified medical expenses are also tax-free.
- Unused Funds are Roll-Overed: Any funds which are not used can be rolled over the next year. The funds in your HSA belong to you; you can take them with you when you change your job.
- Follow the rules: Follow the laws and regulations to avoid penalties for using your HSA funds for qualified medical expenses.
Can I Open a Health Savings Account on My Own?
Yes, it is possible to open a Health Savings Account on your own. If you work as a self-employed individual, you should research the HSAs provided by banks or brokerages like Fidelity, HealthEquity, or Lively. Just keep in mind that you carefully consider your options to get the finest HSA for your need.
Also, See: Health Insurance Premium