A Health Savings Account (HSA) is an account used to pay for routine health care expenses.
HSA's are funded by you with pre-tax dollars.
Your HSA funds are owned and controlled by you the account holder.
Your HSA savings that are not used to pay eligible health care expenses remain in your fund year after year for future health care expenses or your retirement.
Your HSA is portable; the funds remain with you regardless of employment.
What can HSA funds be used for?
The funds belong exclusively to the individual or employee. Funds can be withdrawn for any purpose, but if they are withdrawn for non-qualified medical expenses to someone under age 65, the non-qualified amount withdrawn is taxable and subject to a 10% penalty by the IRS. After age 65 there is no penalty for non-qualified withdrawals but the amount is taxable as ordinary income.
Funds used to pay for the following from your HSA account are also tax and penalty free.
1. Qualified medical expenses defined under section (213 of the IRS code)
See (Qualified HSA Health Care Expenses)
2. COBRA Insurance.
3. Qualified Long-Term Care Insurance.
4. Medicare and retiree health insurance premiums, but not Medicare Supplement premiums.
5. Health Insurance premiums for individuals receiving unemployment compensation.
6. Certain direct payment insurance coverages as defined under 213 of the IRS code.
1. Vision Care
2. Dental Care
3. Accident
4. Disability
5. Specific Disease or Illness
6. Fixed Dollar Amount Per Day (or other period of hospitalization)
7. Long Term Care
Contributions are allowed up to 100% or your High Deductible Health Insurance plan deductible. The maximum annual contribution
is $ 2,600 for individual policies and $ 5,150 for family policies (indexed annually).
Use this tool to calculate your Maximum HSA Contribution.
Individuals age 55-65 may make additional "catch-up" contributions of up to $500 in 2004, increasing to $1,000 annually in 2009 and thereafter. A married couple can make two catch-up contributions as long as both spouses are at least 55 and are both on the High Deductible Health Plan. Catch-up contributions will help individuals accumulate assets for retiree health expenses.
For taxable years
Beginning in: | The additional contribution
amount is: |
| 2004
| $500 |
| 2005
| $600 |
| 2006
| $700 |
| 2007
| $800 |
| 2008
| $900 |
| 2009 and thereafter
. | $1000 |
Click on More Information to view a 2004 First Year Contribution Table that will determine how much you can contribute from the month that the Health Savings Account plan becomes effective.
 More Information
|
1. TAX SAVINGS
Federally Qualified HSA contributions can be deducted from your gross income on your federal tax return, even if you do not itemize deductions.
Many states also allow the deduction from state income taxes.
2. TAX DEFERRED INTEREST & EARNINGS
Funds left to accumulate in your HSA can grow with tax deferred interest and earnings.
3. REDUCED INSURANCE PREMIUMS
Your insurance premiums are usually lowered by 20%-40% when you change from a low deductible to a high-deductible plan.
You can use these savings to fund your HSA.
4. PORTABILITY
Even if you change jobs, your HSA funds go with you.
You own your account.
5. LONG-TERM SAVINGS
You can choose to let the funds in your account grow tax-deferred.
After age 65, you may make withdrawals from your HSA for any reason without a penalty.
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