What is an HSA?
A health savings account (HSA) is an account that you can use to pay for certain health care expenses.
To open an HSA, you must be enrolled in what’s called a “qualified high-deductible health plan,” or HDHP. This means your deductible is at least $1,300 if you have insurance just for you, or $2,600 if you have insurance for yourself and your family.
You also can have other types of coverage, such as workers’ compensation, dental coverage or vision insurance.
However, you cannot open an HSA if:
- You have other health coverage that helps you pay for health care expenses before your deductible is met.
- You or your spouse has a flexible spending account (FSA) or health reimbursement arrangement (HRA).
- You also have Medicare or TRICARE.
- Someone else can claim you as a dependent.
- You have used Veterans Affairs hospital or medical services in the three months prior to opening your HSA, unless it was for a disability related to your military service.
How do funds get into an HSA?
You can contribute money to your HSA anytime. If your employer allows it, you can have money from each paycheck deposited directly into your HSA. Or make contributions yourself.
Sometimes, your employer also will make a contribution to your HSA.
The Internal Revenue Service (IRS) sets a limit on how much you can contribute each year. For 2017, the limit for self-only coverage is $3,400. The limit for family coverage is $6,750. In 2018, the limits will increase to $3,450 and $6,900.
If you’re 55 or older, you can contribute an extra $1,000 per year. This is called a “catch-up” contribution. It helps you save for health care expenses in retirement.
What can you pay for with an HSA?
You might be surprised at what you can pay for with your HSA funds.
What happens to HSA funds at the end of the year?
Money in your HSA doesn’t disappear at the end of the year. It’s yours to keep. You can add funds for years without spending anything, or spend the funds right after you contribute them. It’s up to you.
If you change jobs or change health plans, the HSA and the funds are still yours to keep.
- Money you put into the account can reduce your taxable income.
- Money you keep in your HSA earns interest tax free.
- Money you take out to pay for eligible health care expenses is never taxed.
Want more information?
Find more information about HSAs on our PayFlex site, including videos, calculators and FAQs.