A Health Saving Account is a tax advantaged savings account which is combined with a qualifying high deductible health insurance plan
. This savings account is then used as a tool to save money for current and future medical expenses. Although health plan savings accounts are very popular, still many people do not know much about them. When researching HSA accounts, there are some things to consider.
Pre-Tax Contributions to Health Savings Account
A health saving account is kind of like an IRA but for your health. Any contributions you make into your HSA account go in tax free either as a pre-tax payroll deduction or as an above the line deduction on your taxes if the contributions have been taxed prior to being made Most anyone can build up enough savings for health expenses if they put a bit of each pay check into their health savings account.
Allow Budgeting
People sometimes have a difficult time budgeting for their health care. Having a HSA health savings account provides a mechanism to save and budget for health care With the help of the HSA account, one can budget a percentage of one's income to carefully plan their finances and to help avoid the large medical bills that might otherwise be difficult to to pay.
Penalties For Early Health Savings Account Distribution
You should remember that an HSA account is really only designed for health expenses. Withdrawals for non-qualifying medical expenses before turning 65 do trigger income tax on the distributions plus a 10% penalty. So, early distributions for non-qualified medical expenses should be avoided in order to get the most out of an HSA.
More Control
A well funded HSA along with an HDHP provides the insured more control over their medical decisions. Because a high deductible health plan requires the insured to pay 100% of their deductible, this arrangement generally provides incentive to stay healthy and be a smarter shopper for health care.
Who can apply for HSA account?
Anyone with a qualifying high deductible health plan can open an HSA. They are offered by banks and financial institutions around the country.