Health Savings Account (HSA)
HSA (Health Savings Account) is a beneficiary account opened by a taxpayer to avail of medical benefits, which works as an alternative in case the high deductible plans fail to follow the expense.
How does an HSA work?
HSA is opened for the employee by the employer. It benefits the taxpayer and provides health coverage as a top-up on HDP. HSA has separate eligibility criteria for those who are interested in it.
Deductibles applied for HSA.
You should be paying 1400 USD as an individual to get started for a personal HSA Account, whereas 2800 USD is a start amount for a family purpose. You will benefit from physical and dental relief in the policy.
Advantages of having an HSA
- Save on taxes.
- Save on your medical expenses.
- Your money works harder in an HSA.
- An HSA is an investment.
- Save for retirement.
Disadvantages of having an HSA
- Unpredictable illness can make it difficult to budget for the HSA account. You might need to pay the difference amount from your pocket in such scenarios.
- Figuring out the cost and quality of medical care is quite a tricky and time-consuming process during an emergency.
- Many employees find investing in an HSA account challenging because of the high maintenance charge.
How much can you withdraw from an HSA?
You can withdraw money from an HSA account for your personal use. If you plan to use this money for an ineligible expense(medical or non-medical), the expense amount will be taxed. If you are a fit person, i.e. not having a physical disability and below the age of 65, You will be fined 20% of the total amount you have withdrawn.
Rules to contribute to HSA
If your health insurance gives you four-figure deductibles, it’s time to invest in an HSA or HDHP, whichever suits you the best. Funds deposited in any scheme can pay medical costs until the deductible plan is met.
Can I open an HSA?
If you find yourself in any of the following criteria, you might be eligible to open an HSA Account.
- Are not covered by any other medical plan, [Example: By your spouse]
- Are you not enrolled in medicare
- Not enrolled in any TRICARE product
- An unclaimed as a dependent on someone else’s tax return
- Not covered by any medical benefits from the Veterans Administration.
Benefits of HDHPs with HSAs
- You might need to pay a lower monthly premium for HDHPs than non-HDHPs.
- If you don’t have a yearly medical expense, the unspent HSA fund is transferred from year to year and helps you build tax-free savings to bear a high medical cost later, which is non-taxable.
Employer’s contribution to HSA
If your organisation has fewer than 500 people, an average of 750 USD is paid on behalf of a single employee or 1200 USA for an employee and his dependents. If your organisation employs more than 500 people, then the general contribution is 500USD per employee and 1000USD for employees and dependents.
Health Savings Account (HSA) Tax Benefits
- HSA’s premiums are not eligible for federal income taxes.
- If you earning any interest from HSA, it might be exempted from taxes
- Any amount paid from an HSA Account is tax-free