A Health Savings Account (HSA) is a convenient method to save for medical expenses while also reducing your taxable income.
To be eligible for an HSA in 2019, you must be enrolled in a qualifying high-deductible health insurance plans with a deductible of at least $1,350 for individuals and $2,700 for families. Maximum-out-of-pocket expenses for such plans are $6,750 for individuals and $13,500 for families. Out-of-pocket expenses include deductibles and copays but not premiums.
You will receive a debit card or checks linked to your HSA, which you can use to pay for eligible expenses such as deductibles, copays, and coinsurance. Unlike a Flexible Spending Account (FSA), the balance in your HSA rolls over from year to year so you don’t have to worry about losing your funds. If you are over the age of 65 and enrolled in Medicare you can no longer contribute to an HSA, but you can still use existing funds for eligible expenses.
There are many tax advantages with HSAs. Contributions are pre-tax, and the money also grows tax-free. In addition, the contributions made to your HSA are tax-deductible.