What is a Health Savings Account (HSA)?
A Health Savings Account (HSA) is a tax-advantaged savings account designed specifically to help individuals save for qualified medical expenses. HSAs are available to individuals enrolled in high-deductible health plans (HDHPs). By contributing to an HSA, account holders can set aside pre-tax dollars to cover various healthcare costs, from doctor visits to prescription medications.
Key Features of HSAs:
- Tax Advantages: Contributions to an HSA are tax-deductible, reducing your taxable income. Furthermore, the interest or investment gains earn tax-free.
- Qualified Medical Expenses: Funds in the HSA can be used for a wide range of medical expenses including but not limited to deductibles, copayments, dental and vision care.
- Portability: HSAs are owned by the individual, meaning you can keep your account even if you switch jobs or health plans.
- Rollover Benefits: Unlike Flexible Spending Accounts (FSAs), unused funds in an HSA roll over year after year, allowing for long-term savings.
- Retirement Savings: After age 65, funds can be withdrawn for non-medical expenses without a penalty, similar to retirement accounts.
Conclusion:
In summary, an HSA is a versatile savings tool that not only helps individuals manage healthcare costs but also promotes long-term financial planning through its tax advantages and rollover benefits.