A Health Savings Account (HSA) is like a savings plan where you can stash money you make, before you pay taxes on it. Then use that money for eligible healthcare expenses, including deductibles, co-pays, dental, vision and other medical expenses. Like a Flexible Spending Account (FSA), it can help ease the burden of high out-of-pocket costs and lowers your taxable income, which could lead to a lower tax bill.
You can contribute up to $3,500 to an HSA if you have single coverage or up to $7,000 for family coverage in 2019 If you’re 55 or older, you can kick in another $1,000.
When you open an HSA—either through your work-sponsored health insurance plan or at a bank or financial institution—you’ll typically get a debit card to access your funds. Once money’s in your account, it’s yours for good: Your balance rolls over from year to year, and the account is portable. That means if you leave your job, the account follows you. (But note that if you use the money on non-qualified medical purchases, you’ll be expected to pay income taxes.) Another benefit of HSA accounts is that the money can be invested. The money grows, and can be distributed, totally tax-free, IF . . .
There’s one big catch to all these perks: To sign up for an HSA, you must be enrolled in a high-deductible health plan. As you can probably guess, this type of health insurance policy has a high deductible and out-of-pocket costs—which is why an HSA can be so valuable.
In 2019, a health plan is considered "high-deductible" IF
Should I Open an HSA?
I am a Certified Public Accountant and pride myself on making investing, personal finance and business concepts easy to understand.