A health savings account, or HSA, can be a valuable tool in helping you save for unforeseen medical expenses and lower your taxable income. Many employers offer HSA options, but it can be difficult to know what’s right for your financial goals and what you’re eligible for.
Here are some of the basics of health savings accounts so you can make the right choice when it comes to your savings.
What is an HSA?
A health savings account is a bank account for your medical expenses. You decide how much to contribute each year and your employer will automatically deposit the funds. The funds can be used for copayments, deductibles, and other eligible medical expenses, but are generally not eligible for premiums. Your HSA savings are renewed every year, so there is no need to make unnecessary purchases to clear the balance every 12 months.
There are government-determined contribution limits, but your employer must help you stay compliant. A checkbook or debit card linked to your account will be issued to be used for eligible medical expenses. Instead of paying with your checks or traditional savings, you’ll have the security of knowing that money has already been set aside for these expenses.
How can I qualify?
Health savings accounts are specifically intended for people with high deductible health coverage. These high deductibles can result in significant out-of-pocket expenses for employees, so it is strongly recommended that funds be set aside specifically for this purpose. Although many employers offer HSA options, you can purchase your own if your insurance plan qualifies.
Each year, the IRS sets parameters determining what is considered a high-deductible plan, usually based on a minimum deductible or maximum reimbursable expense. You can find out if your plan is accepted by looking online or speaking with your tax professional. Whether you have a pre-existing condition or just want peace of mind during a medical emergency, using an HSA can help ease the burden of high medical bills.
Tax and investment advantages
Health savings accounts also offer special tax and investment benefits for employees. The main advantage is to reduce your tax liability with contributions. If you contribute $ 2,000 per year, your tax liability will be $ 2,000 less than your taxable income. If you save through your employer, contributions will be considered pre-tax and if you open an account yourself the deposits are tax deductible. There is no penalty for using these funds on qualifying medical purchases, and no tax or interest will be payable as your savings increase.
Familiarizing yourself with all the financial tools available is a sure-fire way to make informed choices with your money. Careful planning and dedication to the process will ensure your future financial success. Whether you’re planning for retirement or wanting to make sure your family is covered for unforeseen medical bills, consider using a health savings account today to get the most out of your money.
With a United HSA, you’ll have long-term savings, the freedom to make the healthcare decisions that work best for you, and an account that follows you wherever you go. There is no minimum balance and you will receive a free HSA debit card and access to digital banking services. It only takes three easy steps to get started. Learn more and register at ucbi.com/hsa.
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