Today, I’m going to explain to you how you can benefit from having a Health Savings Account.
First, a brief definition of an HSA: An HSA or health savings account is a special individual retirement account (IRA) that the government allows you, the consumer, to have. When you choose a high deductible on your health coverage so you can lower your monthly premiums, you can accumulate tax-deductible contributions in this savings account.
You can then use that savings account for healthcare expenses. For example, you could apply your HSA funds toward your deductible for costs such as doctor visits, prescription drugs, hospitalization or emergency room. You can use HSA funds for whatever your healthcare needs are, including dental or vision expenses.
In other words, when you open an HSA, you then have a special IRA that, when you contribute to it, is tax deductible.
Contributions to a Health Savings Account Are Your Choice
HSA contributions are not required. This is your prerogative. This is your option. They provide an excellent tax advantage, so it would be in your interest to start this savings account for uncovered healthcare expenses.
When the government says what you contribute to your HSA will be a tax deduction, or if it’s processed through your employer, it shows up as a payroll deduction before taxes are taken out. Then as you incur these medical expenses, you can immediately use that money as a distribution, tax-free.
Benefits and Uses of an Health Savings Account
Possibly the greatest benefit of an HSA is that it allows you to accumulate funds. This is not the same thing as a flexible spending account, or FSA. A flexible spending account is very similar, but the money you put into an FSA must be spent in the same calendar year, otherwise you forfeit that money. Under an HSA, the money you contribute accumulates and can be used anytime in your lifetime for qualified healthcare expenses, tax-free.
Another misunderstanding or misconception of HSAs is that you can only use it for healthcare expenses. That’s not true. You can take money out of the HSA for any reason, but it comes out as a taxable distribution if you use it for anything but a qualified healthcare expense.
Therefore, an HSA offers these advantages:
- Lowers your health insurance premium
- Allows you to have tax-free accumulations
- Enables you to cover those out-of-pocket medical expenses with tax-free money
If you have any questions about Health Savings Accounts or want to talk further about an HSA and what it means regarding your health insurance, contact our agency. Mbhealth is a highly respected Missouri and Illinois insurance broker that has been trusted by many. Call us at 314-544-5400 or contact us here.