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Do you know what an HAS is? Today I will tell you everything you need to know about HAS! An HSA- is a health savings account.
An HSA is a special kind of tax-advantaged account that’s designed to help you pay for health care expenses.
Anyone can open an HSA, as long as they:
• Have health coverage through a qualified high-deductible health plan. If you don’t have this type of health plan, you CANNOT open an HSA.
• Are NOT covered by any other health plan
• Are NOT enrolled in Medicare, and
• CANNOT be claimed as a dependent on someone else’s tax return.
As previously mentioned, you can withdraw money from your HSA without paying taxes or a penalty as long as those dollars are used to pay for qualified medical expenses.
Qualified medical expenses include things that are associated with your health plan, such as:
• Deductibles and coinsurance,
• Vision care,
• Dental expenses,
• Over-the-counter supplies, and
• Some insurance premiums.
The account is owned by you, so no matter where you work, the money that’s in the account, always belongs to you—even if it was contributed by your employer.
You can use the money in the account to pay for your current medical expenses, or save it for future medical expenses – including those in retirement.
There are many special advantages to opening an HSA.
You’ve probably heard of the Flexible Spending Account…well, unlike the Flexible Spending Account there’s no “use it or lose it” with an HSA. Any dollars left in your account at the end of the year roll over to the next year. That means you decide whether to spend or save your HSA dollars, which makes it easier to save for the future.
Another advantage of the HSA is what we call triple tax savings. Here’s how that works:
• Not only does the money that’s deposited into the account reduce your taxable income,
• But, the balance in your account earns interest tax free, and
• Any withdrawals from the account are tax free as long as the moneys is used for a qualified medical expense.
That gives you a triple tax savings.
And finally, one of the greatest advantages of the HSA is that it’s portable. Unlike other medical spending accounts that are owned by your employer, the HSA belongs to you, even if you change jobs or retire.
Using your HSA is easy. Let’s start by talking about contributions.
Both you and your employer can contribute money to your HSA. Remember, employer contributions are not taxable to you as employee, and once the money is deposited into your account, it belongs to you.
The best way to contribute to your account is through automatic payroll deductions, if your employer allows this. Not only is this convenient, but payroll deductions help you make consistent contributions, and you get the most tax savings this way. Plus, you have the flexibility to change your payroll deduction at any time throughout the year.
You have a lot of flexibility when contributing to your HSA. You can put money into your account at any time during the year, and you can even contribute up until the tax filing deadline, which gives you more time to fully fund your account.
If you fund your account on a post-tax basis, you’ll realize the tax savings when you file your taxes for the year. This type of contribution becomes an “above-the-line” deduction.
Let’s talk about how much you can contribute to your HSA.
Every year, the IRS sets a maximum amount that you can contribute to your HSA. This maximum is based on your health plan contract type – single or family.
• If you have single coverage, you can contribute a maximum of $3,450 in 2018.
• If you have family coverage, you can contribute a maximum of $6,900 in 2018.
These maximums include contributions made by you and your employer. Together, your contributions cannot exceed these amounts. Every year the amounts change.
Of course, there are exceptions to every rule, and with HSA contributions the exception is that account holders who are 55 or older at any time during that year. These individuals can contribute an additional $1,000 every year to an HSA. This is called a catch-up contribution.
There are just a few things to keep in mind when using your HSA.
• Withdrawals from your account are tax free as long as the money is used for a qualified expense.
• Expenses must be incurred on, or after, the date that your HSA