FAQ about Health Savings Accounts (HSA)

FAQ about Health Savings Accounts (HSA)
Written by Dan Chodan, CPA
 

What is a Health Savings Account (HSA)?

An HSA is a tax-advantaged account created for individuals who are covered under a high-deductible health plan to save money for out-of-pocket medical expenses.

How are contributions made to an HSA?

Contributions can be made by both an individual and the individual's employer in a lump sum or payroll deductions. 

HSA Contribution Limit Chart

Contribution Limit For 2022 2021
Single Coverage $3,650 $3,600
Family Coverage $7,300 $7,200
Individuals ages 55 years and older can contribute an additional $1,000 $1,000
 

What is the HSA Triple Tax Benefit?

In addition to contributions going into an HSA tax-free, the HSA grows tax-free, and funds come out tax-free for qualified medical expenses. For example, an individual can withdraw funds from their HSA to pay qualified medical expenses, such as a dental bill or over-the-counter drugs, without being taxed. Additionally, earnings accumulate tax-deferred and are tax-free if used to pay medical expenses.

 

What's the difference between a Health Savings Account and a Flexible Spending Account?

A Flexible Spending Account allows you to pay for medical expenses and dependent care with pre-tax dollars, but unlike an HSA, your funds do not roll over year to year unless your employer's plan allows you to roll over $500 to the following year.

TIP: Keep all your out-of-pocket medical receipts, so you can withdraw money from your HSA whenever you want.

Why should I consider using an HSA as part of my retirement plan?

HSAs are more tax advantageous than traditional retirement accounts because of the triple tax benefit (tax-free contributions, growth, and withdraws). Once you reach the age of 65, you can take money out of your HSA for non-healthcare expenses penalty-free.

For additional information, please read our blog, HSA for retirement, or complete the form below to speak with one of our advisors. 

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