Health Savings Accounts

What is a Health Savings Account (HSA)?

According to Healthcare.gov, “A health savings account is a type of savings account that lets you set aside money on a pre-tax basis to pay for medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and other expenses, you may be able to lower your overall healthcare costs” (Healthcare.gov, n.d.).

Fidelity, a financial services corporation states, “An HSA is a tax-advantaged account that can be used to pay for qualified medical expenses, including copays, prescriptions, dental care, contacts, eyeglasses, bandages, X-rays, and a lot more. It’s “tax advantaged” because your contributions reduce your taxable income, and the money is not taxed while it is in the account – even if it earns interest or investment returns. As long as you use your HSA funds for qualified medical expenses, you won’t owe taxes when you take the money out of the account. These 3 reasons are considered “triple” tax advantaged. This means they provide more tax advantages than retirement accounts, such as a 401(k) or individual retirements accounts (IRAs)” (Fidelity.com, 2022).

To qualify for an HSA, it must be paired with an HSA eligible High Deductible Health Plan (HDHP) or an eligible Healthshare Plan.

How much money can I put in a Health Savings Account (HSA) each Year?

There is an annual limit on the maximum contribution that you can deposit into a Health Savings Account (HSA). According to the Internal Revenue Service (IRS), “For 2023, if you have self-only High Deductible Health Plan (HDHP) coverage, you can contribute up to $3,850. If you have a family High Deductible Health Plan (HDHP), you can contribute up to $7,750” (IRS.gov, 2023). This can be found on page 6 of the IRS Publication 969, titled Health Savings Accounts and other Tax Favored Health Plans.

Do the funds in the Health Savings Account (HSA) roll over every year?

According to Healthcare.gov, “Unspent HSA funds roll over from year to year, allowing you to build tax-free savings to pay for medical care later. HSAs may earn interest, which is not subject to taxes” (Healthcare.gov, n.d.). In short, any unspent funds currently in your HSA will be rolled over every year and can be spent throughout your lifetime, including in retirement.

What happens to the funds in my Health Savings Account (HSA) when I turn 65?

According to the insurance marketplace for the Centers for Medicare & Medicaid Services (CMS), “If you withdraw funds from your Health Savings Account (HSA) after you are 65 for non-medical costs, you will not pay the 20% tax penalty, but you’ll still have to pay the federal income tax on that amount” (Centers for Medicare & Medicaid Services, 2022). Once an individual is 65 years old, the money within their HSA can be used on non-medical expenses without the tax penalty.

Can the money in my HSA be used on my whole family?

The Michigan.gov website states that, “You can use your HSA funds to pay for qualified medical expenses for your spouse and tax dependents, as long as their expenses are not otherwise reimbursed” (Michigan.gov, n.d.).

What are qualified medical expenses?

Blue Cross Blue Shield has put together an excellent, user-friendly list of qualifying medical expenses. Click here to see their list. Additionally, we recommend looking at the IRS website for more information on qualifying medical expenses by clicking here.

Compare HSA Providers

HSA search is a great website that compare's HSA providers. This gives you information on the bank providing the HSA as well as the monthly maintenance fee for having the account. To visit the HSA Search website, click here.