What is an HSA Account and How Does It Work?

Health Savings Account (HSA) is a tax-advantaged savings account for medical expenses that can help individuals save money for health care costs. It allows you to contribute pre-tax money, grow tax-free, and withdraw tax-free for qualified medical expenses.

Here's how an HSA account works:

1. You must be enrolled in a high-deductible health plan (HDHP) to be eligible for an HSA.
2. You or your employer can contribute funds to your HSA up to the annual limit set by the IRS.
3. The contributions you make to your HSA are tax-deductible, reducing your taxable income.
4. The money in your HSA can be used to pay for qualified medical expenses such as doctor visits, prescriptions, and dental care.
5. The funds in your HSA roll over year after year, so you don't lose any unused money.
6. Once you turn 65, you can withdraw money from your HSA for non-medical expenses without penalty, although you will pay income tax on the withdrawals.

An HSA account, also known as a Health Savings Account, provides a smart way for individuals to manage healthcare expenses while enjoying significant tax advantages. By contributing pre-tax dollars, you can effectively lower your taxable income while accumulating funds that only grow tax-free until you need them.