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

2016 limits
Min. Deductible Max. Out-of-Pocket Contribution Limit 55+ Additional Contribution
Single $1,300 $6,550 $3,350 $1,000
Family $2,600 $13,100 $6,750 $1,000
2017 limits
Min. Deductible Max. Out-of-Pocket Contribution Limit 55+ Additional Contribution
Single $1,300 $6,550 $3,400 $1,000
Family $2,600 $13,100 $6,750 $1,000

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

Annual Physical Examination
Artificial Limb
Artificial Teeth
Birth Control Pills
Body Scan
Braille Books and Magazines
Breast Pumps and Supplies
Breast Reconstruction Surgery
Capital Expenses
Christian Science Practitioner
Contact Lenses
Dental Treatment
Diagnostic Devices
Disabled Dependent Care Expenses
Drug Addiction
Eye Exam
Eye Surgery
Fertility Enhancement

Guide Dog or Other Service Animal
Health Institute
Health Maintenance Organization (HMO)
Hearing Aids
Home Care
Home Improvements
Hospital Services
Intellectually and Developmentally Disabled, Special Home for
Laboratory Fees
Lactation Expenses
Lead-Based Paint Removal
Learning Disability
Legal Fees
Lifetime Care—Advance Payments
Long-Term Care
Medical Conferences
Medical Information Plan
Nursing Home
Nursing Services

Organ Donors
Physical Examination
Pregnancy Test Kit
Psychiatric Care
Special Education
Stop-Smoking Programs
Vision Correction Surgery
Weight-Loss Program

Ineligible medical expenses may include

Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby
Controlled Substances
Cosmetic Surgery
Dancing Lessons
Diaper Service
Electrolysis or Hair Removal
Flexible Spending Account
Funeral Expenses

Future Medical Care
Hair Transplant
Health Club Dues
Health Coverage Tax Credit
Household Help
Illegal Operations and Treatments
Insurance Premiums
Maternity Clothes
Medical Savings Account (MSA)
Medicines From Other Countries

Nonprescription Drugs and Medicines
Nutritional Supplements
Personal Use Items
Swimming Lessons
Teeth Whitening
Veterinary Fees
Weight-Loss Program