Understanding Health Savings Accounts

A health savings account (HSA) is an account funded to help you save for future medical expenses. There are certain advantages to putting money into these accounts, including favorable tax treatment.

Who Can Have an HSA?

Any adult can have an HSA if you:

• Have coverage under an HSA-qualified,high deductible health plan (HDHP)
• Have no other first-dollar medical coverage (other types of insurance, such as specific injury or accident, disability, dental care, vision care or long-term care, are permitted)
• Are not enrolled in Medicare
• Cannot be claimed as a dependent on someone else’s tax return

Contributions to your HSA can be made by you, or eligible family members. However, the total contributions are limited annually. If you make a contribution, you can deduct the contributions (even if you do not itemize deductions) when completing your federal income tax return. Contributions to the account must stop once you are enrolled in Medicare. However, you can still use your HSA funds to pay for medical expenses tax-free.

HDHPs

You must have coverage under an HSA-qualified HDHP in order to open and contribute to an HSA. Generally, this plan will not cover first-dollar medical expenses, and it must have a deductible of at least (2016 and 2017):

• Single coverage: $1,300

• Family coverage: $2,600

In addition, annual out-of-pocket expenses under the plan (including deductibles, copays and coinsurance) cannot exceed (2016 and 2017 limits):

• Single coverage: $6,550

• Family coverage: $13,100

In general, the deductible must apply to all medical expenses (including prescriptions)covered by the plan. However, plans can pay for preventive care services on a first dollar basis (with or without a copay). Preventive care can include routine prenatal and well-child care, child and adult immunizations, annual physicals, mammograms and more.

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A health savings account (HSA) is an account funded to help you save for future medical expenses.

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