The Health Savings Account (HSA): A Guide to Contributions
The Health Savings Account (HSA) is a tax-advantaged savings account that allows you to set aside money for qualified medical expenses. HSAs are available to individuals who are enrolled in a high-deductible health plan (HDHP).
How much can I contribute to my HSA?
The amount you can contribute to your HSA each year depends on your HDHP coverage and your family size. For 2023, the contribution limits are:
– Self-only coverage: $3,850
– Family coverage: $7,750
If you are enrolled in an HDHP for less than 12 months, you can only contribute a prorated amount. For example, if you are enrolled in an HDHP for six months, you can contribute up to half of the annual contribution limit.
Can I contribute to my HSA before I am enrolled in an HDHP?
No, you cannot contribute to your HSA before you are enrolled in an HDHP. You must be enrolled in an HDHP on the first day of the month in order to make a contribution for that month.
What happens if I am no longer enrolled in an HDHP?
If you are no longer enrolled in an HDHP, you cannot make any further contributions to your HSA. However, you can still use the money in your HSA to pay for qualified medical expenses.
What are the benefits of contributing to an HSA?
There are many benefits to contributing to an HSA, including:
– Tax-free contributions: Contributions to your HSA are made pre-tax, which means they are not subject to federal income tax.
– Tax-free growth: The money in your HSA grows tax-free, which means it can accumulate faster than money in a traditional savings account.
– Tax-free withdrawals: Withdrawals from your HSA are tax-free if they are used to pay for qualified medical expenses.
How can I open an HSA?
You can open an HSA through a bank, credit union, or other financial institution. You will need to provide proof of your HDHP coverage when you open your HSA.
HSAs are a great way to save for medical expenses. If you are eligible for an HSA, you should consider opening one and contributing as much as you can afford.
Disclaimer: Please seek the advice of a licensed agent to ensure these rules apply to you and your specific, individual circumstances.
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