Enjoy Tax Benefits while Saving for Medical Expenses
A Health Savings Account (HSA) is a tax-advantaged account that lets you save money for future medical expenses. Contributions can be made by you and/or your employer. Total annual contributions are deductible on your federal tax return. Money in your account can be used to pay for medical expenses for yourself, your spouse, or your dependent children, for any "qualified medical expense" permitted by law. Contributions must stop once you are enrolled in Medicare, but you can keep any money in your account and use it tax-free for medical expenses.
Contributions to your HSA can be made by you, your employer, or both. While total annual contributions are limited, you can deduct these contributions on your federal tax return. Contact your tax advisor.
You can use the money in your account to pay for the medical expenses of yourself, your spouse or your dependent children for any "qualified medical expense" permitted under the law including:
- Most medical care and services
- Dental and Vision care
- Prescription drugs
Although contributions must stop once you are enrolled in Medicare, you can keep any money you have placed in your account and use it tax-free for medical expenses.
Benefits of an HSA
- No fees
- No minimum balance requirements
- HSA Checking earns dividends computed daily, paid and compounded monthly
- Funds not used in a given year are rolled over to the next year and grow tax-free with interest earned.
- Tax benefits
- Annual contributions are deductible from federal taxes up to the maximum allowable amount
- Dividends earned are free from federal taxes
- Qualified withdrawals are free from federal taxes
- Some states allow tax deductibility and do not tax dividends earned. Consult a tax advisor for details.
Note: An HSA must be combined with a High Deductible Health Plan (HDHP), which covers larger medical expenses after the deductible is met.