An HSA, or Health Savings Account, is a tax-favored savings account used to pay for qualified medical expenses of the account holder, the account holder’s spouse and any eligible dependents tax free. An HSA is not a Use-It-Or-Lose-It type of account it is a Use-It-Or-Keep-It account. The money not spent in an HSA account by the end of the year stays in the HSA account and the account holder continues to have access to those funds to pay for future qualified medical expenses tax free. With an HSA, over time account holders have the opportunity to accumulate large balances that they can take with them into retirement to use to pay for their retiree medical expenses tax free.
An HSA is an individually owned account, it can never be a “joint account”. However the HSA account holder can use the money in their account to pay for their own qualified medical expenses and the qualified medical expenses of their spouse and any eligible dependents tax free.
In order to open and contribute to an HSA you must meet the following requirements:
- You must be enrolled in an HSA Qualified Health Plan. Sometimes referred to as an HDHP High Deductible Health Plan.
- You cannot be enrolled in any Nonqualified Health Insurance including any benefits you may get through a spouse’s employer such as:
- A Medical Flexible Spending Account (FSA) that is not limited to dental and vision expenses.
- A Health Reimbursement Arrangement (HRA) that pays first dollar benefits before you have met your deductible.
- You cannot be enrolled in Medicare. Being 65 or older and Medicare eligible is not a disqualification the disqualification is the actual enrollment in Medicare.
- You cannot be claimed as a dependent on someone else’s tax return.