HSA: Down To The Basics

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What Is A Health Savings Account?

A Health Savings Account, or HSA, is a great way to save for medical expenses and lower your taxable income.1 You can think of an HSA like a 401(k) but for healthcare related costs. 

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How Does An HSA Work?

To be eligible to contribute to an HSA, you must be covered by a qualified HDHP, which is a high deductible healthcare plan where you pay for most of your health care costs until you meet your deductible. After you meet the deductible, the plan starts paying the major portion of your healthcare expenses. 

One of the biggest benefits of an HSA over other healthcare plans is that your HSA balance rolls over from year to year so you never have to worry about "using or losing it". 

Who Can Contribute?

Each year, you can determine how much you want to contribute to your HSA account, however, keep in mind that you cannot exceed government-mandated maximums. If you have an HSA through your job, you can automatically contribute through your payroll. Depending on your company, your employer may choose to contribute as well. 

How Long Can You Contribute?

Once you reach age 65 and you're enrolled in Medicare, you can no longer contribute to an HSA, but you can still use the money for out-of-pocket medical expenses. If you use the money on non-eligible expenses, you have to pay income tax on that amount (plus a penalty if you’re under 65).

What Is The Maximum You Can Contribute?

As of 2022, you can contribute up to $3,650 for yourself and $7,300 if for family coverage

When you reach age 55 and are eligible to have an HSA, you can contribute an additional $1,000 each year through age 65 or until you enroll in Medicare.

What can I use my HSA for?

What Can You Use Your HSA On?

Examples of what you can use your HSA on:

  • Eyeglasses, contacts
  • Prescriptions
  • Doctor office visits
  • X-rays
  • Dental treatment (X-rays, fillings, braces, extractions, etc.)

This list includes common examples of HSA qualified medical expenses. This list is not all-inclusive. For more information, visit irs.gov and search for Publication 502 or 969.

How To Make The Most Of Your HSA

The key to maximizing your HSA is increasing your contributions, and not withdrawing your funds immediately. It's best to leave the money alone (if you can). This will allow your HSA contributions to grow over time. You can use your HSA as a helpful savings tool if you use it properly!

Check Out Coastal's HSA


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1. Please consult your tax advisor for additional tax information.