What you need to know about health savings accounts (HSAs)

Health Savings Accounts (HSAs) are one of the most useful but most poorly understood and rarely used health care financing options.

An HSA is a tax-efficient savings program covering healthcare costs. It offers free contributions and tax-free withdrawals.

Unlike the Flexible Spending Account, there is no “use it or lose it” provision – you can carry it over year after year.

In fact, an HSA offers particularly attractive tax benefits because you can use the HSA as an investment account for health care costs.

However, if the IRS allows this type of benefit, you know it comes with conditions. You need to coordinate your HSA with a high deductible health plan.

You cannot use an HSA with a PPO or regular HMO. You can only include yourself, your spouse, and any dependents you claim on your taxes.

There are limits on how much you can put into the account: For 2022, it is $ 3,650 for an individual, and for a family the maximum contribution is $ 7,300. There is a catch-up provision of an additional $ 1,000 if you are over 55 years old.

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There are also minimums on deductibles in your high deductible plan. It’s complicated with a lot of rules: Be very careful about what you are getting into in advance.

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Following: Money Monday Section