October 15th: HSA Day – Who knew???
We circled back to our original AI friend ChatGPT to get some help with this article and have the internet scoured for the Top 10 HSA related questions.
1. What is an HSA?
An HSA, or Health Savings Account, is a tax-advantaged savings account designed for individuals enrolled in a high-deductible health plan (HDHP). It allows you to save money specifically for qualified medical expenses.
2. Who is eligible to open an HSA?
To open an HSA, you must be enrolled in a high-deductible health insurance plan, not be covered by other health insurance that isn’t an HDHP, not enrolled in Medicare, and not claimed as a dependent on someone else’s tax return.
3. What are the contribution limits for an HSA?
As of 2024, the annual contribution limits for an individual with self-only coverage were $4,150, and for family coverage, it was $3,300. These limits change annually, so it’s important to verify the current limits each year when making your updates.
4. Are HSA contributions tax-deductible?
Yes, contributions made to an HSA are tax-deductible, meaning they reduce your taxable income. Additionally, any interest or investment earnings within the HSA are tax-free.
5. Can HSA funds be invested?
Yes, once your HSA reaches a certain threshold, typically around $1,000, you can invest the funds in various investment options like stocks, bonds, or mutual funds, allowing your savings to potentially grow over time. Options will vary based on the investment options provided by your financial institution.
6. What expenses can be paid for using an HSA?
HSA funds can be used for a wide range of qualified medical expenses, including doctor’s visits, prescription medications, dental care, vision care, and certain over-the-counter medical items.
7. Do HSA funds roll over from year to year?
Yes, unlike Flexible Spending Accounts (FSAs), the funds in an HSA roll over from year to year, and there’s no “use it or lose it” provision. The money continues to grow and accumulate over time in a bank account that you own.
8. Can I use HSA funds for non-medical expenses?
Yes, but if you withdraw funds for non-medical expenses before age 65, you’ll incur a 20% penalty, in addition to income tax. After age 65, you can withdraw for non-medical expenses without the penalty, similar to a 401k, but you’ll owe income tax.
9. Can an employer contribute to an employee’s HSA?
Yes, an employer can contribute to an employee’s HSA. Employer contributions are often part of a benefits package, but the total contributions (employee + employer) must stay within the yearly contribution limits.
10. What happens to an HSA if I change jobs or health plans?
Your HSA is yours to keep, even if you change jobs or health plans. You can continue to use the funds for qualified medical expenses, and you can also keep the account and continue to contribute to it, provided you’re still eligible.
Please note that specific rules and regulations regarding HSAs can change, so it’s always advisable to consult a financial advisor or tax professional for the most accurate and updated information.
Here at H|BC, we always recommend anyone on an HSA to always save their receipts for anything/everything that you pay out of your account. The policing authority for HSA’s is the IRS, so if you get audited, they can ask to see proof that everything paid out of your HSA was a legitimate charge. How do you do that? Save your receipts. 😊
Thanks everyone for the read! If you have interest in learning more about Health Savings Accounts, please let us know. We love brainstorming with our business partners!!!