Health Savings Account (HSA)

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What is a Health Savings Account (HSA)?
 

A Health Savings Account or HSA is a type of account that allows an individual to contribute pre-tax money to pay for qualified medical expenses. While the funds in an HSA cannot be used to pay for insurance premiums, the money may be used to pay for eligible medical, dental, vision, and prescription medications. Simply put, it’s like setting a savings account that you can put money into but the catch is that you can only spend it on medical expenses. 

How can you qualify for a Health Savings Account (HSA)?
 

Just because you want to have an HSA does not mean that you can just go ahead and set one up. There are specific requirements needed to be eligible to open an HSA. An individual must meet the following criteria: 

My spouse has an HSA. Will I be covered under the same HSA? 
 

No, you will not be covered by your spouse’s HSA. Having a joint HSA is not allowed. If you would like to have an HSA and you are an eligible individual, you may open a separate HSA. 

What are the benefits of having a Health Savings Account (HSA)?
 

The main benefit of having an HSA is being able to use the funds to reduce out-of-pocket costs for medical bills. Many medical expenses are eligible as well. Because of the Coronavirus Aid, Relief, and Economic Security (CARES) Act which was passed in 2020, even over-the-counter (OTC) medications can be eligible expenses. 

Also, other people are allowed to contribute to an HSA fund. Aside from the individual, employers and family members can also contribute money to the fund. Even if the Internal Revenue Service (IRS) has set limits on the contributions, it is still a big help to have other people contribute money. 

Another benefit of an HSA is that you can claim tax deductions for contributions made to an HSA. Any interest made from the funds will be tax-free. Not only that, if you use your HSA funds for qualified medical expenses, the distributions will also be tax-free. 

Finally, there is no expiry on using HSA funds. The money will stay in your account until such time that you use them. An HSA is also “portable” which means that you will still have your HSA even if you change employers. 

Is a Health Savings Account (HSA) the same as a Flexible Savings Account (FSA)?
 

No, HSAs and FSAs are not the same. While both are related to health-related expenses, they 

differ in the following ways: 

HSA (Health Savings Account)

FSA (Flexible Savings Account)

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