What is an HSA exactly? A Health Savings Account is a savings account that allows money to be set aside tax-free to pay for qualified medical expenses for yourself and immediate family members.
Who can contribute to an HSA? Anyone enrolled in an especially designated qualified High-Deductible Health Plan (HDHP) either through the Marketplace or an employer-based plan.
Where can I open an HSA? A bank where you currently do business makes for easy transfers between accounts. There are other options to research online that may offer higher returns or the option to re-invest. Unlike an FSA, the money in an HSA is retained by the account owner and any remaining balance rolls over from year to year.
Why would I want to open an HSA? Dollars you contribute to your HSA are considered pre-tax dollars. This means that the amount contributed reduces taxable income. This deduction is calculated on the tax return for the contribution year. The money in this account also grows tax-free. Spending this money for qualified medical expenses for the account owner, spouse or eligible dependents is also tax-free. These funds may NOT be used to pay for health insurance premiums.
When can’t I contribute to an HSA? Once enrolled in any part of Medicare, whether enrolling in Part A when turning 65, or being awarded Medicare eligibility through a disability determination, HSA contributions must cease. If enrolling in Medicare later than age 65, it is important to remember that the Part A start date will be six months prior to the Part B effective date. In this instance, you would need to discontinue your HSA contribution six months prior to enrolling in Medicare.
How much can I contribute? Every year the IRS determines the HSA contribution limits. For 2025 an individual may contribute up to $4,300; the family maximum is $8,550; for individuals 55 and older, an additional $1,000 “catch-up” amount is allowed. An HSA contribution can be made before the tax filing deadline for that coverage year.
If deciding to enroll in an insurance plan that allows HSA contributions seems confusing, let the licensed insurance agents at On Point Insurance Agency (insuranceonpoint.com) help!