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Six Things To Know About Hsas
Health savings accounts (HSAs) are investment accounts that allow you to set aside pre-tax dollars for "qualified medical expenses" to pay for outlays not covered by your health insurance plan. By setting aside money pre-tax, your contributions don't count toward your adjusted gross income at the end of the year. But in order to take advantage of HSAs, you'll need to understand how they work and the rules that apply.
1. To open an HSA, you need to be covered by a high deductible health plan (HDHP). An HSA is a type of tax-advantaged medical savings account, with features that could help you save for medical expenses and give you the option to invest those funds. However, in order to qualify for an HSA, you must participate in a HDHP. In these accounts, you pay more of your medical expenses out of pocket, with insurance coverage applying only after you reach a certain deductible that's set by the IRS annually. You can use the funds that you put aside in your HSA to pay for expenses not covered by your health insurance.
2. If your employer doesn't offer an HSA, you might be able to open one on your own. While many employers offer HSAs, you might still be able to open one even if your employer doesn't, or if you're self-employed. If you choose to set up an HSA on your own, the same tax features apply. There are eligibility limitations, so make sure to check with a tax professional.
