An HSA (Health Savings Account) is a tax-advantaged savings account designed to help you save money for medical expenses – and YES, you should consider contributing to one.
HSAs have 3 major tax advantages:
1. They’re funded through either pre-tax dollars through an employer or tax-deductible dollars if you open your own account (and as a bonus advantage, contributions funded through an employer are not subject to FICA taxes).
2. You don’t pay taxes on the account’s growth over time.
3. You can reimburse yourself, or pay directly from an HSA, for qualified medical expenses tax-free.
Your HSA balance rolls over every year, unlike a Flexible Spending Account, meaning that you won’t lose your savings if you don’t use it. In 2023, you can contribute up to $3,850 for an individual or $7,750 for a family. If you’re 55 or older, you can make a catch-up contribution of an extra $1,000 each year.
Do I qualify for an HSA?
You may qualify for an HSA if you’re enrolled in a high-deductible health insurance plan. In 2023, that means a deductible of at least $1,500 for an individual or $3,000 for a family, and the plan’s total yearly out-of-pocket expenses limit must not exceed $7,500 for an individual or $15,000 for a family. You also can’t be enrolled in Medicare or claimed as a dependent on someone else’s tax return.
Learn more about HSAs with these videos:
Video: What You Need to Know About Health Savings Accounts (HSAs)