The cost of healthcare and insurance can be quite high. If you also have a high deductible plan, it may make sense to open up a Health Savings Account (HSA).
HSAs are like a personal savings account, but they can only be used for certain healthcare expenses. If an HSA is coupled with a high deductible plan then you’ll have lower monthly premiums, and you can save money to meet your healthcare expenses until you hit that deductible.
What are the general features and tax benefits of an HSA?
- Your contributions are pre-tax or tax-deductible*
- Interest earned is tax-free
- Tax-free withdrawals may be made for qualified medical expenses
- Unused funds and interest are carried over, without limit, from year to year
- Your HSA is not dependent on your employer – you keep it even when you change jobs, health plans, or retire.
*Contributions are tax-deductible on your Federal tax return. Some states do not recognize HSA contributions as a deduction. Your own HSA contributions are either tax-deductible or pre-tax (if made by payroll deduction). See IRS Publication 969. Consult a qualified tax advisor for advice.
What are the disadvantages of HSAs?
- HSAs may not make sense for you if you have a chronic illness or know you’ll need expensive medical care in the future
- There are limits to how much you can contribute to the account each year
- You’ll face penalties for non-medical withdrawals
Interested in opening up an HSA Account? Check out our FAQs here. Want to talk to a Member Representative about what’s right for you? Give us a call at (989) 777-3620.