Advantages of a Saving through HSA Accounts
Many money-conscious Americans are taking advantage of a medical savings account sometimes referred to as an HSA account. This health savings account (HSA) is available to United States’ taxpayers who participate in a high deductible health plan. One advantage to an HSA account is that the funds deposited into the account are not subject to federal income tax.
HSA accounts may sound similar to a flexible spending account (FSA) and it does have some of the same benefits as the FSA. However, there are significant differences. When contributing to an FSA, the account holder must use the funds deposited in the account by the end of the calendar year. Funds not used will be forfeited. Funds deposited into an HSA account can accumulate and any unused monies will be rolled over to the next year. The money placed in the account belongs to the account holder.
The funds deposited into the HSA may be used at any time to pay for covered medical expenses. When expenditures occur, the account holder incurs no federal tax penalty or tax liability when using the funds. Account holders do not have to acquire approval from either the bank or their medical insurer to use the funds for a qualified expense. Some of these qualified expenses include:
- Dental costs
- Vision expenses
- Chiropractic care
- Medical transportation
- Prescription medications
- Durable medical equipment (such as eyeglasses or hearing amplification devices)
HSA’s are designed to encourage individuals to save and prepare for health care expenses. While saving this money, the account holder retains full control of the funds. Participants in HSA’s are required to maintain accurate and adequate documentation of all expenses. Withdrawals for undocumented reasons may be subject to a tax penalty of up to 20%. This penalty may be waived for account holders over the age of 65.
Several banks offer HSA accounts as a service to their customers. The funds can be withdrawn through either a check or by using a bank-issued debit card. Some banks will provide customers with either option.
It is important to note that contributions into HSA accounts cannot exceed yearly maximum contribution limits. For the current year, the contribution limit for a single individual is $3,050. A family may contribute up to $6,150 this year.
Many individuals and families view HSA accounts as an opportunity to set aside a specific amount of money from each paycheck to pay for future medical expenses. Since these are tax-free dollars, it makes good financial sense to participate in one of these programs. These accounts are much more attractive than FSA’s since the money deposited into the HSA account belongs to the account holder and cannot be forfeited.
All banks do not yet offer this service. To make it easy to find a bank with an HSA, customers can visit our website. We have extensive resources and can direct customers to participating banks. Our website contains information about a wide number of banks. On here you can find rates, rules and customer reviews.
It is important to remember that the money deposited into the HSA is pre-tax dollars and that the money not needed this year may be held for future expenses. It is easy to see why so many people are opting for HSA accounts. This truly is a win-win situation for the account holder. We can point you in the right direction towards a bank that can meet your HSA account needs.