A health savings account (HSA) is a tax-exempt account established for the purpose of paying or reimbursing qualified medical expenses for an individual, spouse or family. To be eligible to open an HSA, you must first have an HSA-qualified high deductible health plan (HDHP).
An HSA provides triple tax savings. Funds are deposited on a pre-tax or tax-deductible basis, earnings grow tax free and withdrawals for qualified medical expenses are tax free.
HSA funds roll over from year-to-year, and you may use or keep your funds depending on your financial needs.
In short, an HSA is like a 401(k) or IRA for your medical expenses, only better because withdrawals for qualified expenses are tax free.
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An HSA is much like a savings account, but the funds are reserved for eligible healthcare expenses. Unlike a simple savings account, the money is deposited tax free or tax deductible, and the funds remain tax free when used to pay or reimburse for eligible medical expenses. The interest and earnings grow tax free.*
*Talk to your advisor to determine if earnings and dividends are taxed in your state.
Federal regulations require you to meet these eligibility requirements in order to open and contribute to an HSA.
You must be:
You must not be:
Contact your health insurance provider to confirm that your plan is HSA compatible. FPS cannot determine if your health plan is qualified.
The IRS outlines which medical, vision, dental and prescriptions qualify for reimbursement from an HSA. Many common expenses like doctor’s office visits, prescriptions, labs and x-rays are covered. For specifics, review IRS publication 502 and IRS Publication 969.