A Health Savings Account (HSA) works with your medical insurance to help you plan, save, and pay for health care expenses. With an HSA, you are in charge. You decide:
- How much you will contribute to your account (up to the legal annual maximum amount)
- When you want to use the funds in your HSA to pay for or reimburse yourself for eligible medical expenses
- Which bank will administer your Health Savings Account
Benefits
The money in your HSA is always yours — there is no “use it or lose it” rule. All amounts in your HSA belong to you, and unspent balances remain in your account until spent. Your account is portable, too. You may continue to pay qualified medical expenses from your HSA even if you:
- Change jobs
- Change medical coverage
- Become unemployed
- Move to another state
- Get married or divorced
HSAs offer triple tax savings:
- The money you put in is tax deductible, up to the legal limit set by the IRS.
- Your savings grow tax free.
- Any money you take out to pay for qualified medical expenses is income-tax free.
Eligibility
To open a Health Savings Account, you must meet these criteria:
- You are covered by an HSA-eligible, high-deductible health plan (HDHP)
- You are not covered by any other health plan (such as a spouse’s plan) that is not a high-deductible health plan, unless it is other permissible coverage, such as specific injury insurance or accident, disability, dental, or vision insurance.
- You are not eligible to be claimed as a dependent on someone else’s tax return.
- You are not enrolled in Medicare.
- You are not enrolled in TRICARE or TRICARE for Life, a military benefits program.
- You have not received Veterans Administration (VA) benefits within the past three months
Contributions
Each Year the Internal Revenue Service announces the annual contribution limits for Health Savings Accounts. You may not contribute more than the annual contribution limit. For the purpose of Health Savings Accounts, Individual Coverage refers to someone with self-only coverage; Family Coverage refers to coverage of two or more family members. There is also an additional “Catch-up” Contribution if you are age 55 or over.
| 2017 | 2018 | Coverage Levels |
| $3,400 | $3,450 | Individual |
| $6,750 | $6,850 | Family |
| $1,000 | $1,000 | Catch-up (Age 55 and over) |
**Be sure to check for annual updates to the HSA Contribution limits
If your circumstances change and you are no longer eligible to contribute to an HSA, you can keep the Health Savings Account as long as you like and use it to pay for eligible medical expenses tax free.
Any money taken out of your HSA prior to age 65 that is not used for a qualified medical expense is subject to ordinary income tax plus a 20% penalty. After age 65, funds that are withdrawn for non-qualified medical expenses are subject to ordinary income tax, but not to the additional penalty.