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HSA (health savings account) can be used as an additional tool for saving money.
In some cases, the HSA qualifies for a substantial reimbursement of medical expenses. Holders of such accounts get several benefits at once: contributions to this account are tax-free, and you can use them at any time to pay medical costs.
Individuals and companies use HSA to pay for high medical costs. Many employers contribute to their employees’ medical savings accounts. Since this contingency plan has no expiration date, it can be used even after retirement as an emergency reserve. Below is a more detailed explanation of what a health savings account (HSA) is and what its benefits are.
A health savings account is a tax-free savings account with a bank to help certain categories of people recover their health care costs. The HSA account can only be opened by a person with health insurance that has a large deducted amount. Many employers offer their employees to buy insurance with a high deductible and, in order to save money, combine it with the HSA account.
You make a pre-tax contribution to an employer-sponsored HSA, and your contributions are tax-deductible. You can withdraw tax-free amounts from your account at any time for medical expenses.
The limit for the annual contribution to the HSA account in 2017 is $3,400 for individuals and $6,750 for a family. If you are over 55 years old, you can deposit an additional $1,000 per year. Contributions to HSA are accepted until the last day for federal taxes.
You don’t need to get permission from the IRS to open an HSA account, but there are certain rules and requirements that you need to follow. You must have health insurance with a high deductible, this year it is $1,300 for individuals and $2,600 for families. However, it is important to know that not all high deductible insurances are suitable for opening an HSA.
A health savings account can be opened by people who are not dependents of other taxpayers and do not have Medicare or any other supportive health insurance.
Only suitable trustees can open a medical savings account: insurance companies, banks and IRS-approved individuals.
Many companies have a dedicated HSA administrator, but you can choose any other suitable trustee to open and manage an account for you. Experts advise you to use the HSA administrator of the company you work for – this way you will not miss out on valuable contributions from the employer and your requests will be processed faster.
If you decide to do this yourself, take a look at HSASearch.com to find the plan that’s right for you. The site has a search function that allows you to compare over 350 HSA administrators.
To understand if a medical savings account is right for your financial strategy, you need to understand its advantages and disadvantages.
There are a lot of them:
There are several disadvantages to medical billing that may put you off this idea.
HSA is suitable for you if your health insurance has a high deductible and you have significant medical costs.