What is Health Savings Accounts (HSA)?
A health-savings account is a tax-favored account that you can contribute to before taxes. Contributions to an HAS are deductible, earnings in the health savings account are tax-exempt. withdrawals from a health savings account are tax free as long as the money is used for qualified medical expenses. Unlike with a flexible spending account, you do not have to spend the money by the end of the tax year. You can carryover year by year. You can carry it with you when you change your job.
How do I qualify for an HAS?
- You cannot be claimed as a dependent on someone’s return;
- You cannot be enrolled in Medicare plan;
- You must be covered by a high deductible heal plan (HDHP);
- You must have no other health coverage such as HMO or PPO plan, including flexible saving accounts.
How much can I contribute?
The IRS provides guidance for HSA and qualified high deductible heal plan based on single-only and family coverage each year.
2013 IRS Limits |
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| Single Plan | Family Plan | |
| Minimum Deductible | $1,250 | $2,500 |
| Maximum Out-of-Pocket | $6,250 | $12,500 |
| Maximum Contribution Limit | $3,250 | $6,450 |
| Catch-up Contribution (55+) | $1,000 | $1,000 |
2014 IRS Limits |
||
| Single Plan | Family Plan | |
| Minimum Deductible | $1,250 | $2,500 |
| Maximum Out-of-Pocket | $6,350 | $12,700 |
| Maximum Contribution Limit | $3,300 | $6,550 |
| Catch-up Contribution (55+) | $1,000 | $1,000 |
How can I make contributions?
There are two different ways to make your contributions: pre-tax and post tax. A pre-tax contribution is one that was made through your payroll, either as a part of benefits plan or as a deduction from your paycheck. In either case, the money from your employer is prior to the payroll tax and federal income tax withholding being applied. The contributions were not include in you taxable income. Both you and your employer did not pay income or payroll taxes on any of these amounts. It was reported by your employer and shows up in box 12 on W-2 with code W. A post-tax is an HSA contribution to your HSA after all these taxes have been taken out. For example, you can make a contribution out of your check account for 2013 until April 15, 2014. It is only the post-tax contribution that you can take an “above the line” deduction for your adjusted gross income, allowing you to have a lower tax rate and pay less tax when you file your tax return.
How can I spend the money in HSA?
You can use HSA fund to pay your qualified medical expenses that qualify for the medical and dental deduction on schedule A and are incurred by you, your spouse as well as your qualifying dependents. You will subject to income tax with an additional 20% penalty if you use any of the money for non-qualifying medical expenses before age 65.
