A health savings account (HSA) is a savings account in which you can set aside pre-tax money to use on qualified health expenses.
By using this untaxed money on deductibles, co-pays, and other expenses you can lower the overall cost of your healthcare. An HSA is only available with high deductible health plans (HDHP). Most employers will notify you if your healthcare plan is eligible for an HSA. This is your personal account – so you can contribute to it at any time and although your employer can, they may choose not to contribute. Additionally, the money rolls over from year to year. There are many ways to go about opening your HSA such as through your employer and maybe even your bank. In this article, we will dive into how to open an HSA, who can open one, and exactly what you can use all of this saved money on!
There are so many positives to opening an HSA, so if you have a high deductible health plan, don’t pass on the opportunity to open one up. Although it takes some time and effort at first, it becomes easy to save money towards your healthcare. Once your HSA is open, your employer will likely allow you to place a percentage of your paycheck directly into your HSA, making it easy for it to add up quickly. However, you also can add money to this account whenever you want within the allowable limits. You don’t have to pay taxes on contributions made to your HSA and you are also allowed to earn interest on it. Best of all, the money in your HSA is yours even if you change employers.
How to open a Health Savings Account
To open an HSA, you need to have an HDHP, which can be purchased through your employer or on your own. If you have an HDHP through your employer, it’s easiest to reach out to the department that handles healthcare coverage (usually Human Resources) and ask for information on best places to open an HSA. It’s likely this isn’t the first time they’ve helped someone with this issue and can give recommendations in your area. If you’d like to tackle this task on your own, there are many credit unions, banks, and federally approved institutions that you can open an HSA with. A quick Google search can provide such institutions in your area in which you can open an HSA. To open any bank account you usually need two forms of identification, such as a birth certificate, drivers license, social security card, or passport. Additionally, to open an HSA you need proof of your HDHP.
Here are some additional things to keep in mind when choosing the best place to open your HSA:
- Ensure you can manage the account online
- Beware of administrative, annual, and sign up fees
- Ask about the withdraw/transfer process
Who can open an HSA
To open an HSA, there aren’t many restrictions! Optum bank listed out what you need to keep in mind when considering an HSA:
- You must be covered under an HDHP as of the first of the month
- You can’t be claimed as a dependent on someone else’s tax return
- You have no other health coverage, except what is permitted by the IRS
- You cannot be enrolled in Medicare, TRICARE or TRICARE for Life.
- You haven’t received Veterans Affairs (VA) benefits within the past three months, except for preventive care
- You do not have a health care flexible spending account (FSA) or health reimbursement account (HRA)
Other exclusions may apply and that’s a great question for your employer or the bank in which you’d like to open your HSA with. You can even open an HSA if you’re not a U.S. citizen! With the proper documentation and understanding that your HSA will be in American Dollars.
What can you buy with your HSA
The list for what you can buy with your HSA is virtually endless, which is a great benefit to this account! You can use your HSA for deductibles and copays, as well as over-the-counter (OTC) health care need and prescriptions. Some OTC items you can buy with your HSA account are lip balms, hot and cold packs, contact solution, baby sunscreen, first aid kits, and breast pumps. You may be excited to know that many retailers accept HSA payment as well. Brands like Walgreens, Target, Walmart, and even Amazon accept HSA for the previously listed OTC products. To get even more creative with your spending, look at brands like Warby Parker, that accept HSA payments for prescription eyeglasses, eye exams, and contacts. Other things you may get excited to use your HSA for are massages, dental procedures, or new medical items to help treat yourself and your kids.
Limits on Health Savings Accounts for 2019
The Internal Revenue Service (IRS) establishes limits for annual HSA contributions as well as what qualifies an HDHP. Here are the limits for 2019:
HDHP Limits (from the IRS website):
For the calendar year 2019, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,750 for self-only coverage or $13,500 for family coverage.
HSA Contribution Limits (from the IRS website):
For the calendar year 2019, the annual limitation on for an individual with self-only coverage under a high deductible health plan is $3,500. For the calendar year 2019, the annual limitation on deductions for an individual with family coverage under a high deductible health plan is $7,000.
Now you know all the steps you need to take to open your HSA and how to utilize it all year long. I hope it helps you take advantage of this tax savings