A Health Savings Account can provide tax-free money for qualified medical expenses

With the cost of health insurance rising exponentially many people are looking to use a Health Savings Account (HSA) to bring down the cost of their insurance premium and give them more control over their medical expenses.  When paired with a qualified High-Deductible Health Plan (HDHP), a Health Savings Account account can be a great way to accomplish this.

A Health Savings Account allows you to deposit money into an account, tax-free, up to amounts laid out by the IRS each year.  The current contribution limits are in the table below.  You can then use that pre-tax money to pay for qualified medical expenses.  Things like chiropractor visits, prescription drugs, dental work, and even some over-the-counter drugs all qualify as medical expenses.  A more detailed list is below.

Pairing the Health Savings Account with a High-Deductible Health Plan gives you a stop-loss where you no longer have to pay anything for covered medical care.  For example, if your HDHP has a deductible of $3,000 you would be responsible for 100% of all medical expenses, including prescription drugs, doctor visits, etc until you have spent $3,000 in that calendar year.  Then the insurance picks up 100% of the tab for any covered expenses for the remainder of the year.

High-Deductible Health Plans can have premiums 20-40% lower than comparable non-HDHP health plans.  If you add in the tax-deduction on your Health Savings Account contributions, a Health Savings Account accounts paired with a HDHP can be an easy decision for many people.

Contact us for help getting a Health Savings Account set up and enrolling in a High-Deductible Health Plan.

Current HSA contribution limits

For more detailed information on HSA plans and taxes, visit the U.S. Department of Treasury website at www.ustreas.gov or talk with your tax advisor.

What Can HSA Funds Be Used For?

Funds you withdraw from your HSA are tax-free when used to pay for qualified medical expenses as described in Section 213(d) of the Internal Revenue Service Tax Code. The expenses must be primarily to alleviate or prevent a physical or mental defect or illness, including dental and vision. A list of these expenses is available on the IRS Web site,www.irs.gov in IRS Publication 502, “Medical and Dental Expenses.”

Any funds you withdraw for non-qualified medical expenses will be taxed at your income tax rate plus 20% tax penalty if you’re under 65.

The following list provides examples of eligible and ineligible medical expenses. This list is not all-inclusive. Remember, the IRS may modify its list of eligible expenses from time to time. As always, consult your tax advisor should you require specific tax advice.

Eligible medical expenses may include

Ineligible medical expenses may include