What is a Health Savings Account?
The HSA is a tax-sheltered savings account similar to an IRA, but the contributions are used to pay medical expenses. Participants enroll in a high deductible health insurance plan. A tax-deductible savings account is then opened to cover current medical expenses. Contributions are tax-deferred and can be withdrawn to cover qualified medical expenses tax free. Unused balances roll over from year to year.
Who can qualify?
Anyone up to age 65 enrolled in a qualified high deductible insurance plan is eligible for a tax-deductible HSA.
How much can be contributed to the HSA in 2010?
Annual contribution limits for 2010 are capped at either the high deductible or $3,050 for individual and $6,150 for family-whichever is less. $1000 additional contribution for age 55+.
What can HSA funds be used for?
The funds belong to the individual. Funds can be withdrawn for any purpose, however if not withdrawn for qualified medical expenses by someone under age 65, the amount withdrawn is taxable and subject to a 10% penalty by the IRS. After age 65, there is no penalty for non-qualified withdrawals but amount is taxable.
What is a high deductible health insurance plan?
For 2010, a high deductible health insurance plan is defined as a health plan with a minimum deductible of $1,200 for individual coverage and $2,400 for family coverage.
How am I saving money?
When a HSA is combined with a qualifying high deductible health insurance plan the premium savings is up to 50% or more and the contributions to the HSA are not taxed. The earningson the HSA funds are not taxed and use of the money is tax-free for qualified health expenses.
What applies to my deductible?
All covered medical expenses apply to the deductible each year including doctor’s office visits, prescriptions, and any major medical claims. HSA family plans have one deductible for the entire family. So, all covered medical expenses for the entire family apply to one deductible.
What else can HSA funds be used for?
Tax free dollars can also be used to pay for other medical expenses typically not covered under traditional types of health plans like dental, eyeglasses, contact lenses, lasix eye surgery and much more…