What is a Health Savings Account?
A health savings account, also known as an HSA, is used to pay for present and future health expenses with tax free money. Some employers manage the HSA’s for their employees and other people manage their own accounts.
Who can have a Health Savings Account?
You can open an HSA if you have a high deductible health plan. The insurance deductible has to be a minimum of $1300 for a singles and $2600 for families. It also needs to have a maximum out-of-pocket of $6,450 for singles and $12,900 for families. If your health insurance deductible comes under this umbrella, you would be eligible for a HSA.
What makes a Health Savings Account a good thing?
- You don’t pay taxes on the money you put in a Health Savings Account.
- You don’t pay taxes on the money that grows inside a Health Savings Account.
- You get to pay for medical related expenses with tax free money.
How Does A Health Savings Account Work?
All you need to do is open a Health Savings Account at a bank or financial institution. It’s just like opening any other type of account – such as a checking account, or a money market account – except this account is called a Health Savings Account.
How much can you put into a Health Savings Account?
Contributions (the amount that can be deposited into an HSA account) Breaks Down Like This:
$3,350 for a single per year for 2015
$6,650 for a family per year for 2015
$1,000 per year extra can be added if you are over 55 years old
How to Increase Your Contribution If You Are Over 55:
If both you and your spouse are over 55, it is better for each of you to have your own Health Savings Account, because you can each contribute an extra $1,000 as a “catch up” contribution each year.
For example: If you and your spouse have one single Health Savings Account, the most you could contribute would be $7650. If you both each had your own Health Savings Account, the total you would contribute would be $8700 ($3,350+$1,000 each) – over $1000 more!
This money goes in as pretax dollars and is deducted from your income tax, so you would not be paying taxes on it.
Remember, you can only contribute to an HSA if you have certain high deductible plans.
If at any time before you turn 65 you use that money for a non-qualified deduction, you will have to pay income taxes on the withdrawal, plus a 20 percent penalty. It is important to know what qualifies as a covered expense. Most everything in our office qualifies as an HSA expense. You can use that money for orthotics, orthopedic shoes, pads for your shoes, vitamin supplements, fungus toenail medicine, and other medications that we have available.
What Happens to the HSA After I Turn 65?
After you turn 65 and sign up with Medicare, you are no longer able to make contributions to the account. You can use the money for health expenses, or payment for your Medicare premiums, but not for the Medigap premiums.
If you choose not to use it to pay off the premiums, you would be able to use it just like you would a regular IRA. It would then be taxed at your present rate.
People have a lot of questions dealing with HSA’s, here at Hollowbrook Foot Specialist we will be glad to answer any questions that you have or point you in the right direction of where to look. Just give us a call for an appointment at 845 298-9074.
By David Schlam