What is an HSA Account and How Does it Work?

Health Savings Account (HSA) is a tax-advantaged account that allows individuals to save money for medical expenses. It works in conjunction with a High Deductible Health Plan (HDHP), providing a way to save and pay for qualified medical expenses tax-free.

Here's how an HSA works:

1. Individuals with an HDHP can open an HSA account.
2. Money can be contributed to the HSA account, either by the individual or their employer.
3. Contributions are tax-deductible, meaning they can lower your taxable income.
4. The funds in the HSA can be used to pay for qualified medical expenses, such as doctor visits, prescriptions, and more.
5. Any unused funds in the HSA rollover year after year, unlike flexible spending accounts (FSAs).
6. HSAs are portable, so if you change jobs or health insurance plans, you can take your HSA with you.

A Health Savings Account (HSA) is a powerful financial tool designed to help individuals manage their healthcare costs while promoting smart saving strategies. Coupled with a High Deductible Health Plan (HDHP), an HSA offers considerable tax advantages and flexibility.