benefits of an HSA
Save money and save on taxes? Yes, please.
Keep Uncle Sam out of your pocketbook. The money you contribute to your HSA goes in, grows and comes out income-tax free when used for qualified medical expenses. You know you're going to need it — so why not save on taxes, too?
There is no "use it or lose it" rule.
You get to keep the money in your HSA, no matter what, even if you change jobs or move off a qualifying high-deductible health plan. When you, your employer or anyone else contributes to your HSA, it stays there so you can use it when you need it. Plus, any money you keep in your account may earn dividends and once your HSA reaches a certain designated balance, you may choose to invest a portion of your HSA dollars in mutual funds to grow your balance.
It's a family affair.
You can use your HSA to pay for the qualified medical expenses of anyone you claim on your taxes, even if you're only enrolled with single coverage. This is a great way to plan for unexpected medical expenses, from your deductible to an ER visit, for the whole family. This includes your spouse, any dependents you claim on your tax return, or dependents claimed on your ex-spouse’s tax return, or anyone you could have claimed as a dependent.
Prepare your future.
You may not be ready to retire, but chances are you’re already planning for it. An HSA is a great tool to help you prepare for future health care costs and retirement. After turning 65 you can use your HSA funds for non-qualified expenses, like a boat or an exotic vacation. You’ll pay ordinary income tax on those funds, but the 20% tax penalty no longer applies. As you're planning for the future, your HSA can ease your mind and prepare you for retirement by saving money income tax-free. Once you're 65, your HSA is treated like a traditional IRA if you withdraw money for non-medical expenses.
qualifying for an HSA
United HSAs can be used to pay for qualified health expenses for yourself and your covered dependents tax free. To be an eligible individual and qualify for an HSA, you must meet the following requirements, as defined by the IRS:
- You cannot be claimed as a dependent on someone else's tax return.
- You must be covered under a high deductible health plan (HDHP) on the first day of the month.
- You are not enrolled in Medicare, TRICARE or TRICARE for Life or other health coverage except what is permitted by the IRS.
- You haven’t received Veterans Affairs (VA) benefits within the past three months, except for preventive care. If you have a disability rating from the VA, this exclusion doesn’t apply.
- You do not have a health care flexible spending account (FSA) or health reimbursement account (HRA). Alternative plan designs, such as a limited-purpose FSA or HRA, might be permitted.
The 2021 IRS limits are $3,600 single and $7,200 family. HSA participants 55 or older are also eligible for an additional $1,000 contribution catch up amount. Pre-tax dollars may be used for qualifying expenses such as prescriptions, co-pays and deductibles, medical supplies, dental and vision expenses and Medicare premiums after age 65. HSA’s are IRS auditable so those interested should confirm they meet eligibility:
- Covered under a qualifying high-deductible health plan (HDHP)
- No other health coverage except what is permitted by the IRS
- Not enrolled in Medicare, TRICARE or TRICARE for Life
- Cannot be claimed as a dependent on someone else's tax return