High-deductible health plans (HDHP) plans are increasingly common. Enrollment in these insurance plans has surged over the last decade, which means more people than ever are eligible to open a Health Savings Account (HSA).
HSAs offer a tax-exempt way to set aside money for health expenses. Here’s what you need to know before you open an HSA.
What exactly is an HSA?
An HSA is a savings account specifically for people on high-deductible insurance plans. You can set aside pre-tax money in an HSA to help pay for qualifying medical expenses like doctor’s visits, prescriptions and hospital bills.
Who can open an HSA?
You can open an HSA if you’re on a high-deductible insurance plan and you aren’t covered by any other type of non-HDHP insurance. Your plan is considered “high-deductible” if the deductible is at least $1,400 for an individual or $2,800 for a family, as of 2020.
To be eligible for an HSA, you may not be enrolled in Medicare and cannot be claimed as a dependent on someone else’s federal income tax return.
What are the benefits of an HSA?
The funds you contribute to an HSA aren’t taxed, which means you can save money on income tax. HSA funds also roll over year-to-year, which means you don’t need to spend all of your savings in one calendar year.
You can use HSA funds to cover all kinds of medical expenses, dental treatments and health supplies. But keep in mind that some expenses, like gym memberships, aren’t qualified HSA purchases. Review the IRS’s list of what you can and can’t pay for with HSA money, and be sure to keep receipts and records of your HSA expenses in case you need them at tax time.
Where can I open an HSA?
Many banks and insurance companies offer HSA accounts, including WaterStone Bank. The WaterStone Bank HSA offers checks and Debit Cards for easy access to your funds when you need them. Plus, you’ll receive 1,000 ScoreCard® Reward points when you create your profile at scorecardrewards.com for your HSA Debit Card.