How to set up a health savings account
HSA stands for health savings account. It is a great way to help save money for medical expenses and reduce your taxable income.
How can you qualify for a health savings account?
If you are enrolled in a high-deductible health insurance plan, you are able to qualify for an HSA. An out-of-pocket maximum of $6,550 and a maximum deductible of $1,300 within an individual plan is what the IRS defines a HDHP as. For a family plan in 2017, the out-of-pocket maximum is $13,100 and the minimum deductible is $2,600.
It is your choice on how much you would like to contribute to your HAS account. You are not able to exceed government-mandated maximums.
If you are lucky enough to receive an HSA account through your workplace, you can set up an auto-contribution directly from your pay roll.
Essentially, your HSA account acts as a debit card. You will receive a debit card or checks that will link to your HSA balance. You can use the balance on deductibles, copays and coinsurance, including other certain medical expenses.
Your HSA balance will roll over from year to year. Keep in mind, once you reach the age of 65 and are able to enroll in Medicare, you will not be able to contribute to an HSA account anymore. Thankfully, you are able to use those funds for our-of-pocket medical expenses.
HSA accounts come with tax advantages as well.
Matt Irvine, vice president of sales and marketing at Health Savings Administrators, which helps clients invest their HSA funds. “HSA contributions are pre-tax/tax-deductible, the money grows tax-free and the money can come out tax free,” Irvine says. This means your contributions are made before your income is taxed, you don’t pay taxes on the account’s growth, and if you make withdrawals for eligible expenses, you don’t pay tax on that money then, either.
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