Health Savings Accounts (HSA) are government-regulated accounts that allow individuals and families to set aside pretax income to cover health care costs not paid by insurance.
A Health Savings Account is the most tax-beneficial account on the planet because of the triple-tax benefit: 1) pretax contributions (tax-deductible), 2) tax-free growth and 3) tax-free distributions if used to pay for qualified medical expenses. This is a stellar strategy to pay for healthcare costs in the current year and those that occur in the future.
Take this mini quiz to see how well you know the rules and rewards of HSAs.
(1) HSAs are available only to individuals who have a qualifying, high-deductible health plan (HDHP) of $1,500 or more, and families with $3,000 or more.
False. The correct minimums are $1,350 and $2,700.
An individual also must meet the following qualifications to have an HSA account:
- Not be covered by other health insurance
- Not be enrolled in Medicare
- Not be eligible to be claimed as a dependent on someone else’s tax return
(2) Your HSA balance rolls over from year to year, so you never have to worry about losing your savings.
(3) Individuals can contribute up to $4,000 for an individual or up to $6,000 for family coverage in 2019. Seniors that turn age 55 in 2019 can contribute an extra $1,500.
False. Individuals can contribute $3,500 and families can contribute $7,000; seniors (age 55+) can contribute an extra thousand.
(4) At death, you can leave your HSA to your spouse or other named beneficiary.
(5) You can buy a boat with money from your HSA.
False. Eligible expenses must be medically oriented, such as prescription drugs, diagnostic services, dental treatment, orthodontia, hospital services and surgery, laboratory fees, obstetrical expenses, chiropractic care, physical therapy, eye examinations, glasses, contact lenses, laser eye surgery, hearing aids and smoking cessation programs. Here’s the IRS list of expenses eligible for HSA reimbursement