“Health savings accounts: What you need to know” offers a primer and expert answers about Health Savings Accounts (HSAs) to give readers an idea of how these accounts work and how they differ from Flexible Spending Accounts (FSAs).
If you are thinking that you might want an HSA, you should know that you need to meet certain criteria, including being in a high-deductible health plan, having no other health care coverage, not being claimed as a dependent on someone’s tax return, and not being enrolled in Medicare.
“Think of an HSA as a 401(k) for your health care… There is one big difference between the HSA and the FSA: You can roll over the HSA like a Roth IRA and take the money out — tax-free — to cover qualified health-care costs the rest of your life.”
This year, people who are eligible for an HSA can put up to $6,900 into their account (plus $1000 more if you are at least 55). This money is tax-deductible and again, it can does not have to be used within a year so the money can be rolled over. Once you are past the age of 65, if you take money from your HSA for non-qualified medical expenses, those withdrawals are taxed as income.
Because we tend to compare, those who don’t qualify for an HSA may be thinking that this doesn’t seem fair. However, remember that if you don’t qualify for an HSA, you may have other advantages, such as not paying a high deductible for your health plan. We are not saying that everything always evens out for everyone; we we are saying is that it is important to take advantage of what will work best for your situation.