What is a Health Savings Account (HSA)?
An HSA is a special tax-advantaged savings account similar to a traditional individual retirement account (IRA) but designated for health care expenses (medical, dental, and vision).
It allows you to pay for current eligible health care expenses and to save for future qualified medical expenses on a tax-favored basis.
With an HSA, contributions, earnings on investments, and qualified distributions are all exempt from FICA, federal, and state income tax.
HSA dollars roll over from year to year, they stay with you even if you terminate employment, and there is no lifetime limit on the amount you can contribute to the account.
HSAs are a convenient and easy way to save and invest for future medical expenses such as long-term care premiums for you or your spouse, Medicare premiums, and COBRA premiums.
Who is eligible for a HSA?
Anyone covered solely by an HSA-qualified high deductible health insurance plan
You cannot enroll in an HSA if:
You are enrolled in Medicare
You are another person’s dependent
You are covered by a non-HSA health plan
How much can I contribute to my HSA?
The contribution limit on HSAs is based on the number of people covered by your HSA-qualified health plan.
Single coverage (1 covered individual): $3,650
Family coverage (2 or more covered individuals): $7,300
All HSA-eligible participants that are age 55 or older can also contribute an additional $1,000 per calendar year.
I am turning 65 this year and will be going on Medicare. How much can I contribute?
Enrollment in Medicare disqualifies you from being eligible to contribute to a Health Savings Account (HSA).
For the months of the year that you are not enrolled in Medicare, you can contribute a “pro-rated” amount to your HSA.
Example: You have single coverage on your health plan and are 64 years old.
- Medicare enrollment is effective June 1st.
- HSA contributions can be made for January through May (5 months).
- Annual limit for single coverage at 64 years old is $4,650
- $4,500 limit / 12 months in a year = $387.50 per month
- $375 per month * 5 months of eligibility = $1,937.50
From the Department of the Treasury Internal Revenue Service
- Medical and Dental Expenses:
- IRS – Eligible Medical and Dental Expenses
- Health Savings Accounts and Other Tax-Favored Health Plans:
- IRS – Health Savings Accounts and Other Tax-Favored Health Plans
Why Choose an HSA?
If you have any specific questions about how an HSA can benefit you or what types of expenses are qualified under HSA, contact us!
We would love to help you!
Our Email: Info@consolidatedadmin.com
If you’re an employer or agent please contact: email@example.com
Call us between 8:00am and 5:00pm Monday through Friday: +1 (877) 941-5956