What is a Health Savings Account?
A Health Savings Account is a tax-favored savings account combined with a qualifying high-deductible health insurance plan. It allows you to deposit funds tax free into an account to cover medical expenses. This enables you to take control of your own health care decisions.
You must first have a high-deductible health insurance plan that qualifies to be partnered with an HSA. These plan are available through various insurance companies and through web sites like Whitley Benefits.com. The plans are all similar in the fact that they have deductibles between $1,100 and $5,600 for singles, and $2,200 and $11,200 for families. Once your insurance plan becomes effective, you may fund your HSA account.
HSA’s allow you to legally avoid federal income tax by saving up to $2,900 for singles or $5,800 for families, into your HSA account. There is no minimum deposit, but whatever you deposit into your account by April 15th is an “above the line” tax deduction for the prior year’s income tax. This is available to everyone, with no limitations on the amount or source of income.
If you cancel your HSA-qualified health insurance before you’ve had the coverage for a full year, your maximum contribution amount is pro-rated based on the number of months in force.
