What to Know About HSA: Understanding the Basics of Health Savings Accounts

Health Savings Accounts (HSAs) are a valuable tool for individuals and families to save money on healthcare expenses while enjoying tax benefits. Understanding the basics of HSAs can help you make informed decisions about your healthcare finances. Here's what you need to know:

1. What is an HSA?

An HSA is a tax-advantaged savings account specifically for medical expenses. It is paired with a high-deductible health plan (HDHP) and allows you to contribute pre-tax dollars to use for qualified medical costs.

2. Benefits of an HSA:

• Contributions are tax-deductible
• Money grows tax-free
• Withdrawals for qualified medical expenses are tax-free
• Unused funds roll over year after year

3. Eligibility:

To qualify for an HSA, you must be enrolled in an HDHP, not be claimed as a dependent on someone else's tax return, and not be enrolled in Medicare.

4. Contribution Limits:

For 2021, the maximum contribution limits are $3,600 for individuals and $7,200 for families. Individuals over 55 can contribute an additional $1,000 as a catch-up contribution.

5. How to Use HSA Funds:

• Pay for medical expenses not covered by insurance
• Save for future healthcare needs
• Invest HSA funds for potential growth

Understanding the ins and outs of HSAs can empower you to take control of your healthcare expenses and save for the future. Consult with a financial advisor to determine if an HSA is the right choice for you.

Health Savings Accounts (HSAs) are a fantastic way to financially prepare for healthcare needs while enjoying significant tax advantages. By setting aside funds specifically for medical expenses, you can take control of your healthcare costs while benefiting from tax-free growth on your savings.