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What is an HSA, or Health Savings Account and how does it work?

Healthcare can add up, so it’s important to understand your plan and all its benefits so you get the most out of it.

A Health Savings Account is a savings account where you can set untaxed money aside for certain healthcare related expenses.

By using untaxed dollars to pay for things like deductibles, copayments, coinsurance, or other expenses, it can lower your health care costs in the long run.

The funds aren’t subject to federal income tax when deposited into an HSA.

Many HSA’s will not cover premiums.

The benefits include using the untaxed dollars to pay for out-of-pocket medical costs.

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You can freely contribute and an HSA allows for tax free withdrawals.

The money will roll over to the next year if it isn’t spent.

An HSA can also earn interest that isn’t taxed either. Money can be invested and later used for healthcare costs.

There are limitations to HSAs as well.

You can only contribute to an HSA if you have a high deductible healthcare plan.

In 2021 the minimum deductible was $1,400 for one person and $2,800 for a family.

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An HSA cannot be used with a preferred provider organization or health maintenance organization.

The only people who can be included in an HSA are yourself, spouse, and any dependents claimed on taxes.

There are limits to how much can be deposited into an HSA as well.

Related: Medicare open enrollment is here, find ways to save money while still getting the best plan

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