Health Savings Account
Individuals who are enrolled in a high-deductible health plan (HDHP) can access a tax-advantaged savings account known as a Health Savings Account (HSA). The qualified medical expenses that can be paid for with the funds that are deposited into the HSA include prescriptions, deductibles, and copayments. Not at all like an Adaptable Spending Record (FSA), unused assets in a HSA can be turned over from one year to another and could in fact be contributed for expected development.
An individual cannot be covered by any other health plan that is not an HDHP, such as a spouse’s plan or a Medicare plan, to be eligible for an HSA. Furthermore, the person cannot be claimed as a dependent on another person’s tax return. The IRS establishes annual contribution limits for HSAs, and both employer and employee contributions are tax-deductible.
HSAs can give people more control over how much they spend on healthcare and potentially save them money on taxes. They can also be a useful tool for saving money for retirement healthcare costs. However, it is essential to keep in mind that HSAs should not be used in place of health insurance and should be used in conjunction with an HDHP to provide full coverage.