Here's how it works:
- Each year, you decide how much you want to contribute to your HSA, though you can’t exceed government maximums (In 2018, it’s $3,450 for an individual and $6,900 for a family.) If you have a HSA from your company, you can set up easy automatic deductions from your payroll. You won’t pay taxes on these deductions.
- You will receive a debit card or checks linked to your HSA account to use for eligible medical expenses.
Typically, you're eligible for a HSA if:
- You're covered under a high-deductible health plan
- You're not enrolled in Medicare or military health plans
- You cannot be claimed as a dependent on another person's tax return
3X Benefit of a HSA:
1. One big reason HSAs are so popular is that they offer a triple tax exemption:
- No federal income taxes on contributions
- No federal taxes on investment earnings
- No taxes on withdrawals for qualified medical expenses
2. Don't use it? You won't lose it.
You don't have to spend your HSA funds by the end of the year or lose it - like many flexible spending accounts or FSAs. Your HSA is portable so it goes with you even when you leave an employer or you become self-employed.
3. A HSA can become an IRA for health care.
While many people use their HSA to pay for current medical expenses, you could also use it as an "IRA" for health care. If you have money left in your HSA at the end of the year or decide to build up your balance, you may begin to invest your savings.
