One of the key advantages of saving up some cash in your health savings account is that you get to pay no tax on that money. Sounds great? Well, that is not the only thing you get to enjoy. Let us look at the advantages a health saving account offers.
A Health saving account falls under the categories of personal savings accounts. The core duty of money saved in this account is to cater to one’s health expenses which, as we all know, is unpredictable. Cash saved in your health savings account is protected from tax as long as you use it for health expenses. Money in one’s health saving account is used in combination with a High Deductible Health Plan (HDHP).
You can only open and contribute to an HSA if you have a qualifying high deductible health plan. Below is a table containing the maximum contribution one is entitled to. Note that If you are 55 or older, you can add up to $ 1,000 more as a catch-up contribution.
|Year||Self-Only Coverage||Family Coverage||Catch-Up Contributions|
Health Savings Accounts do not have a “use it or lose it” provision. Any funds that are still in the plan at the end of the year can be renewed indefinitely. Here are the requirements to have a health savings account.
Requirements Needed For A Health Saving Account
- Your high deductible health plan should meet the minimum necessary deductible and maximum out-of-pocket limit for the year.
- You are not covered by any other health plan.
- You are not enrolled in Medicare.
- You are not enrolled in TRICARE or TRICARE for life.
- You are not claimed as a dependent on someone else’s tax return.
- You are not covered by Veterans Administration medical benefits.
- You don’t have any disqualifying alternative medical savings accounts, such as a flexible spending account or a medical expense reimbursement account
Apart from having future health-related issues planed against, what other benefit does having a health saving account bring.
Benefits of Health Saving Accounts
Your Rollover Funds Are Safe
You can indefinitely save money on your HSA. Money saved in your HSA rolls over perfectly, and also, all your interest is tax-deferred.
Funds in Your Health Savings Account can be Transferred
The money you have in your account is yours! Irrespective of whether it was sponsored by your employer in the present or past.
To Maximize Savings, Contribute the Annual Limit
Yes! It is as simple as that. Please check the table above for the Annual limit for the years 2020, 2021, and 2022.
Funds in HSA Can Be Invested
For most people, this is the best part of having a health savings account. Funds in your Health savings account can be invested. However, this is dependent on the financial institution you are using. Mutual funds and stocks are often chosen to be invested in.
There you have it. There is nothing to lose saving up money for your future health expenses and getting even more benefits