What is a health savings account (HSA)?
If you have an HDHP, an HSA offers you specific benefits to offset your out-of-pocket costs. You can use pretax dollars to fund an HSA. In fact, your HSA offers triple tax savings:
- Contributions are pretax or are tax-deductible
- You earn tax-free dividends (interest) on your account
- When used for qualified medical expenses, distributions are tax-free
You designate an amount from each paycheck to be saved into your HSA. You can then use those funds to cover your copays as well as IRS-qualified medical expenses, until you meet your deductible. Eligible expenses include:
- Dental care
- Vision care
- Certain medical equipment
Here’s a full list of qualified medical expenses from the IRS.
Your HSA balance carries over year to year, so there are no deadlines to use it – any funds you don’t use this year can be used in the future. You can deposit up to $3,550 for individual coverage or up to $7,100 for family coverage in 2020, per IRS limits.
Learn more about how HSAs work with high deductible health plans.