In today's rapidly changing healthcare landscape, it's becoming increasingly important for individuals to take control of their own healthcare costs. That's where Health Savings Accounts (HSAs) come in. HSAs are a powerful tool that can help you save money on medical expenses while also providing a range of tax benefits.
What is a Health Savings Account?
Essentially, it's a tax-advantaged savings account that allows individuals to set aside funds specifically for medical expenses. The money you contribute to your HSA is tax-deductible, meaning it reduces your taxable income. Plus, any interest or earnings on the account are tax-free. This allows you to save and grow your healthcare funds without having to worry about additional taxes.
What happens to my HSA if I change jobs?
One of the greatest advantages of HSAs is that they are not tied to a specific insurance provider or employer. Whether you decide to switch careers, start your own business, or take a break from the workforce, your HSA remains intact and ready to support your medical needs. No matter where life takes you, your HSA will be there, serving as a reliable financial resource for your medical expenses.
Additionally, the fact that your HSA stays with you eliminates the worry of losing any unused funds. Unlike other healthcare options that may require you to use up your funds within a specific timeframe or lose them altogether, HSAs allow your contributions to roll over from year to year. This means that any funds you don't use in one year can continue to grow and be available for future medical expenses.
Who contributes to my HSA?
In short, you do! One of the most enticing benefit of HSAs is the triple tax advantage they offer. Contributions to your HSA are tax-deductible, the funds grow tax-free, and withdrawals for qualified medical expenses are also tax-free. This unique combination of tax benefits makes HSAs a smart financial choice for anyone looking to save money on healthcare costs.
Your employer can too! Employer contributions to HSA are an additional benefit that can significantly enhance the value of a Health Savings Account. Many employers recognize the value of HSAs in helping their employees manage healthcare expenses and offer contributions to encourage participation. Employer contributions can vary depending on the company and its policies. Some employers offer a set amount each year, while others may match a percentage of your contributions. Regardless of the amount, every dollar contributed by your employer is an additional dollar that can grow and be used for future medical expenses.
These contributions can make a significant impact on your HSA balance over time. With consistent contributions from both you and your employer, your HSA can grow into a substantial nest egg that can be used for healthcare expenses in retirement or other unexpected medical needs.
How much money can I contribute to my HSA?
It's important to note that contributions do have limits set by the IRS and the limits do change periodically.
The HSA contribution limits for 2023 are $3,850 for self-only coverage and $7,750 for family coverage. Individuals 55 and older can contribute an additional $1,000 as a catch-up contribution.
The HSA contribution limits for 2024 are $4,150 for self-only coverage and $8,300 for family coverage. Those 55 and older can contribute an additional $1,000 as a catch-up contribution.
What can I use my HSA for?
From acupuncture to X-rays, the IRS has compiled a list of expenses that can be considered qualified medical expenses. We recommend taking a look at IRS Publication 502 for more detailed information.
If you qualify for an HSA, make sure to take full advantage of all it has to offer. It's a win-win situation that can help you better manage your healthcare expenses and build a strong financial foundation for the future.
This information is provided to you with the understanding that Osgood Bank is not engaged in rendering tax advice. If tax advice is required, you should seek the services of a tax professional.
