Do the perks of your new job sound like alphabet soup? PTO, EAP, HSA … They’re all important to your health, but that last one has the closest ties to your insurance. So, let’s dig into it: What is an HSA?
What Is a Health Savings Accounts?
An HSA is a tax-free savings account that you can use to pay for medical expenses. HSACenter offers a long list of qualifying expenses, from acupuncture to X-rays. For a more in-depth read, check out IRS Publication 502.
Sound good so far? A few more basic rules apply. To use an HSA, you need a high-deductible health plan. This is a plan with a deductible over $1,350 for individuals and $2,700 for families, according to the IRS. In 2019, individuals can contribute up to $3,500 to their accounts, while families can contribute $7,000. If they’re feeling generous, your employer is allowed to contribute to your HSA, too!
How to Use Your HSA
Anyone who has an HSA-eligible health insurance policy can sign up during open enrollment. You’ll receive a debit card tied to your account and use it to pay for qualified medical expenses.
Your contributions go into your HSA tax-free and come out that way, too. The account is also tax deductible. HSAs lower your taxable income — so if you make $50,000 and contribute $3,000, you’re only taxed on $47,000. You can even invest your HSA in stocks and mutual funds.
An HSA can be the cushion you need to cover health care costs until you reach your deductible. And, unlike a flexible spending account, HSA funds roll over annually. You’ll never lose any money or have to spend it at year’s end. This means you can build up your health-related savings for the long term. While not all long-term planning is smart — we’re looking at you, person who shows up to the first date with the wedding venue already reserved — plotting out your health care spending strategy before you run into an illness or injury is a pretty genius move.