With the New Year in sight, it’s also the time of year most people review their health insurance plans and make changes. If you’ve ever wondered about Health Savings Accounts (HSA), here’s our guide to the most frequently asked questions we get about this type of account.
What is an HSA?
If you have a qualifying high deductible health plan, you can use an HSA to save for future medical expenses. Merchants Bank’s HSA offers the return of a savings account with the convenience of a checking account.
Who can have an HSA?
Any adult can contribute to a Health Savings Account if they:
- Have coverage under an HSA-qualified “high deductible health plan” (HDHP)
- Have no other first-dollar medical coverage (with limited exceptions)
- Are not enrolled in Medicare
- Cannot be claimed as a dependent on someone else’s tax return
How and when do I contribute to an HSA?
- Contributions to a Health Savings Account can be made by the account owner, an
employer, or both, each year the account owner is eligible.
- Total contributions are limited annually and can be made up to the amount of the plan deductible, not to exceed annual limits.
- Contributions can be made as late as April 15 of the following year, like an IRA. However, all contributions will be assumed to be made for the current tax year unless deposited in-person and designated for the prior year by completing a Previous Year Contribution form.
How do I determine my HSA contribution?
Annual contribution limits change from year to year. Visit http://www.irs.gov to determine your eligible yearly contribution or consult your tax advisor.
What can I spend my HSA money on?
The money in an HSA is to pay for any “qualified medical expense” permitted under federal tax law, including medical expenses for yourself, your spouse or your dependent children. You may use your HSA to pay for expenses incurred by your spouse or dependent children even if they are not covered by a high deductible health plan.
For a complete listing, please visit http://www.irs.gov or consult your tax advisor. Any amounts used for purposes other than to pay for “qualified medical expenses” are taxable as income and may be subject to tax penalties; tax penalties in certain situations, such as attaining age 65, do not apply (consult your tax advisor).