Understanding HSA

A Health Savings Account (HSA) is a tax-advantaged medical savings account available to U.S. taxpayers enrolled in a high-deductible health plan (HDHP).

To qualify for an HSA, you must be covered by an HDHP, have no other health coverage (except what's permitted), not be enrolled in Medicare, and not be claimed as a dependent on someone else's tax return.

Members can connect their HSA to the HealthJoy app to view their balance. Funds can be withdrawn via debit cards, checks, or reimbursement processes, but it's crucial to retain documentation for qualified medical expenses, as failing to do so may result in penalties.

Contribution limits for HSAs change annually and can be easily found online. HSAs can cover various expenses, including health plan deductibles, copayments, prescription drugs, dental and vision care, long-term care services, and certain health premiums like COBRA. However, most health insurance premiums aren't considered qualified expenses, with exceptions for long-term care insurance premiums, COBRA coverage, and Medicare premiums for those over 65.

Your HSA is inheritable; if your spouse is the designated beneficiary, the account continues as their HSA, allowing tax-free distributions. If a non-spouse is designated, the account ceases to be an HSA upon your death, and its fair market value becomes taxable. If your estate is the beneficiary, the account's value is included in your final tax return. Overall, HSAs are valuable for managing healthcare expenses while providing tax benefits, but understanding the associated rules is essential.