HSAs: Eligibility, Benefits, and How to Open

What is an HSA (Health Savings Account)?

An HSA is a tax-advantaged savings account that allows you to set aside money for qualified medical expenses on a pre-tax basis. This means that you can contribute to your HSA directly from your paycheck, saving money on federal income tax. Earnings in the account grow tax-free, and withdrawals for qualified medical expenses are also tax-free.

Eligibility Requirements for an HSA

To qualify for an HSA in 2024, you must meet the following criteria:

– You must be enrolled in a high-deductible health plan (HDHP).
– The minimum deductible for an individual plan in 2024 is $1,600.
– The maximum out-of-pocket expense limit for an individual plan is $8,050 (including the deductible).
– You cannot have other health insurance coverage that provides benefits before you meet your HDHP deductible.
– You must not be enrolled in Medicare.

Note: If your health insurance does not explicitly mention “HSA,” it is most likely not HSA-eligible.

Benefits of an HSA

– Tax savings: Contributions to an HSA are made on a pre-tax basis, reducing your taxable income.
– Tax-free growth: Earnings in your HSA grow tax-free.
– Tax-free withdrawals: Withdrawals from your HSA are tax-free for qualified medical expenses.
– Triple tax savings: You pay no tax on contributions, growth, or withdrawals.

How to Open an HSA

You can open an HSA at any financial institution that offers them. To open an HSA, you will need to provide your Social Security number, date of birth, and contact information. You will also need to provide proof of enrollment in an HDHP.

Additional Considerations

– Investment options: Some HSAs offer investment options, such as mutual funds or stocks. This can help you grow your savings over time.
– Fees: Some HSAs may charge fees, such as monthly maintenance fees or transaction fees. Be sure to compare fees before opening an HSA.
– Minimum contributions: Some HSAs have minimum contribution requirements. Be sure to check the requirements before opening an HSA to avoid any fees.

If you meet the eligibility requirements and are looking for a tax-advantaged way to save for medical expenses, an HSA may be a good option for you. Be sure to consult with a licensed agent to determine if an HSA is right for you and to find the right HSA for your needs.