Question 1: What is a Health Savings Account (HSA)? Answer: An HSA is a tax-advantaged account designed to help individuals save for qualified medical expenses. It offers flexibility and financial security for healthcare needs when paired with a high-deductible health plan (HDHP).
Question 2: Who is eligible to open an HSA? Answer: To be eligible for an HSA, an individual must be enrolled in a qualified HDHP, not be enrolled in Medicare, and not be claimed as a dependent on someone else’s tax return.
Question 3: What are the tax benefits of an HSA? Answer: HSAs offer several tax benefits, including tax-deductible contributions, tax-free growth of account earnings, and tax-free withdrawals for qualified medical expenses.
Question 4: What are the annual contribution limits for HSAs? Answer: The 2023 contribution limits for HSAs are $3,650 for individuals and $7,300 for families. Individuals aged 55 or older can make an additional catch-up contribution of $1,000.
Question 5: What are qualified medical expenses? Answer: Qualified medical expenses are healthcare costs that can be paid for using HSA funds, such as doctor visits, prescriptions, dental care, and vision care. A more comprehensive list can be found in IRS Publication 502.
Question 6: Can HSA funds be used for non-medical expenses? Answer: Yes, but withdrawals for non-medical expenses are subject to income tax and, if the account holder is under 65, an additional 20% penalty.
Question 7: What happens to unused HSA funds at the end of the year? Answer: Unused HSA funds roll over from year to year, allowing the account holder to accumulate savings for future medical expenses or even use the funds for healthcare expenses during retirement.
Question 8: Can HSA funds be invested? Answer: Yes, HSA funds can be invested in a range of investment options, such as stocks, bonds, and mutual funds, allowing for potential growth over time.
Question 9: What happens to an HSA if the account holder changes jobs or health insurance plans? Answer: HSAs are portable, meaning the account holder retains ownership of the account and its funds even when changing jobs or health insurance plans.
Question 10: How do HSAs impact health insurance premiums and overall healthcare costs? Answer: HSAs are typically paired with HDHPs, which have lower premiums than traditional plans. By utilizing an HSA to cover out-of-pocket medical expenses, individuals can potentially lower their overall healthcare costs while benefiting from the tax advantages of the account.