Requirements for an HSA Account - All You Need to Know

Health Savings Accounts (HSAs) are a valuable tool for managing healthcare expenses, but what are the requirements for opening and contributing to an HSA account?

Here are the key requirements:

• You must be covered by a High Deductible Health Plan (HDHP).
• You cannot be covered by any other health insurance plan that is not an HDHP.
• You cannot be enrolled in Medicare.
• You cannot be claimed as a dependent on someone else's tax return.
• You must not have any other disqualifying coverage.

Additionally, there are limits to how much you can contribute to an HSA each year:

• For 2021, the contribution limit for individuals is $3,600 and for families is $7,200.
• Individuals aged 55 and older can make an additional catch-up contribution of $1,000.

Other important points to note about HSA accounts:

• Contributions are tax-deductible.
• Withdrawals for qualified medical expenses are tax-free.
• Unused funds roll over from year to year and continue to grow tax-free.
• HSAs are portable, meaning you can keep your account even if you change jobs or leave the workforce.

Health Savings Accounts (HSAs) are an incredible way to save for medical expenses while enjoying tax benefits. First and foremost, you must be enrolled in a High Deductible Health Plan (HDHP) to qualify.

Moreover, it’s important to note that you shouldn’t be enrolled in Medicare or covered by another health insurance plan that isn’t an HDHP. Also, if you can be claimed as a dependent on someone else’s tax return, then you won’t meet the criteria to open an HSA.

Regarding contributions, for 2021, you can put away up to $3,600 if you’re an individual, and $7,200 for those who are covering a family. Oh, and if you’re 55 or older, there’s a little treat for you — an extra $1,000 catch-up contribution!

But wait, there’s more! Contributions to HSAs are tax-deductible, and when you make withdrawals for qualified medical expenses, they are tax-free. Plus, any funds you don’t use will rollover annually and can grow tax-free, leading to significant savings!

It's also worth mentioning that HSAs are portable; therefore, you won’t lose your account if you decide to change jobs or retire.