What is a Health Savings Account?
A Health Savings Account (HSA) is an account created for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses that HDHPs do not cover. Contributions are made into the account by the individual or the individual’s employer and are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified medical expenses, which include most medical care such as dental, vision and over-the-counter drugs.
The Health Savings Account has three major tax savings: the money contributed into the account is tax deductible, it grows tax free, and certain withdrawals are tax free if they are for qualified medical expenses. To qualify for an HSA , you must have coverage from a high-deductible health plan and you must not be enrolled in Medicare or be listed as a dependent on another person’s tax return.