How to Know If You Qualify for an HSA Account

Are you considering opening a Health Savings Account (HSA) but not sure if you qualify for one? Let's break it down to help you determine your eligibility for an HSA.

Understandably, many individuals are interested in the benefits of an HSA, such as tax advantages and the ability to save for medical expenses. To qualify for an HSA, you must meet certain criteria:

• You are covered by a High Deductible Health Plan (HDHP) - This is a health insurance plan with a higher deductible than a traditional plan.
• You are not covered by any other health insurance that is not an HDHP.
• You are not enrolled in Medicare.
• You cannot be claimed as a dependent on someone else's tax return.

If you meet the above requirements, you are eligible to open and contribute to an HSA.

It's important to note that even if you qualify for an HSA, there are limits to how much you can contribute annually. For 2021, the maximum contribution limits are $3,600 for individuals and $7,200 for families.

Now that you know the basic eligibility criteria, here are some additional details to consider:

• HSAs offer triple tax benefits - contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free.
• You can use HSA funds to pay for a wide range of medical expenses, including deductibles, copayments, and even some over-the-counter medications.
• Any unused funds in your HSA roll over from year to year, unlike a Flexible Spending Account (FSA) where funds typically do not roll over.

Are you thinking about setting up a Health Savings Account (HSA) but unsure if you meet the requirements? Don't worry, we’ll help you understand how to determine your eligibility for an HSA.

Many people are drawn to HSAs due to their fantastic benefits like tax savings and the ability to earmark funds for future medical costs. To qualify for an HSA, you will need to satisfy the following conditions:

• Your coverage must be through a High Deductible Health Plan (HDHP), which has a higher deductible than standard plans.
• You cannot be enrolled in other health coverage that isn’t an HDHP.
• You should not be enrolled in Medicare.
• You must not be claimed as a dependent on another person’s tax return.

Once you confirm that you meet these qualifications, you’re ready to open and start contributing to an HSA.

However, remember there are specific limits on how much you can contribute each year. For 2021, the contribution limits are set at $3,600 for individuals and $7,200 for families.

Now that you understand the basic eligibility guidelines, here are a few added insights to keep in mind:

• HSAs provide triple tax advantages - contributions can be deducted taxes, any earnings grow tax-free, and withdrawals for qualified medical costs are also tax-free.
• Funds in your HSA can be used to cover a variety of medical expenses including deductibles, copayments, and many over-the-counter medications.
• Any unused HSA funds roll into the next year, which is a significant advantage compared to Flexible Spending Accounts (FSAs), where typically funds expire.