Health Savings Account (HSA)

 

What is a Health Savings Account (HSA)?

An HSA is a type of savings account that lets individuals set aside and invest pre-tax money to pay for qualified medical expenses. This provides an opportunity to lower overall health care costs. HSA funds may be used to pay for deductibles, copayments, coinsurance and other expenses but generally not premiums. HSA balances may also be rolled over from year to year.

 

TL;DR – An HSA is a tax-advantaged vehicle that allows you to contribute and invest pre-tax dollars and pay for qualified medical expenses under a high-deductible plan..

 

Eligibility

  • Must have a High Deductible Health Plan (HDHP) and:

    • Minimum deductible of $1,400 for an individual;

    • Minimum deductible of $2,800 for a family

  • Must be under age 65 and not enrolled in Medicare

Contribution Limits

  • 2021 – $3,600 for self-only coverage; $7,200 for family coverage

  • 2022 – $3,650 for self-only coverage; $7,300 for family coverage

Withdrawals

  • No taxes when funds are used to pay for qualified medical expenses.

  • Withdrawals made for non-qualified expenses are subject to 20% withdrawal penalty and taxes (under age 65) or taxes only (age 65 and over)

Taxes

  • Contributions are made with pre-tax dollars and therefore tax-deductible

  • Growth on earnings and withdrawals for qualified medical expenses are tax-free

  • Non-qualified withdrawals subject to taxes and 20% penalty if under age 65

 
Edward Oh