Understanding Your HSA

Many folks have Health Savings Accounts (HSAs), but not too many understand them fully - are you one of them? We are here to help! Learn HSA basics, how to make contributions as well as identify and pay for HSA eligible expenses.

HSA Basics

A Health Savings Account (or HSA) is a tax-advantaged account that you can use to pay for qualified medical expenses that your insurance plan does or does not cover. HSAs offer tax advantages and cover a broad range of qualified medical expenses and HSAs are not "use-it-or-lose-it," meaning the account belongs to you, and your contributions can accumulate year after year. You may choose to save more than what you’ll need each year to secure the annual tax advantages or to build a long-term savings account for future medical expenses.

How To Make Contributions

If your HSA is provided through your employer, contributions are usually deducted pretax from your paycheck and sent directly to your HSA bank account. Your employer may make additional contributions to your HSA too. If you’re not contributing through your employer, you can contribute funds directly to your HSA bank and later write them off as tax deductions.

Each year, the IRS sets limits on how much you can contribute to your HSA. There are two limits based on how you file. Single filers, joint filers and filers over the age of 55 also qualify for catch-up contributions. For 2023, the contribution limits are:

• Individual: $3,850

• Joint: $7,750

• Catch-up Contribution: $1,000 (If you are an HSA account holder over the age of 55 you are eligible for a $1,000 annual catch-up contribution, which raises your applicable contribution limit by $1,000 per year)

Identifying and Paying for HSA Eligible Expenses

Typically, you can access your funds through a debit card or checks that are linked directly to your HSA. You can use the funds in your HSA to pay for qualified medical expenses, which are defined by the IRS and include deductibles, medical supplies, and even items like eyeglasses and dental fillings.

As part of the 2020 CARES Act, over-the-counter medications and menstrual care products are now eligible for purchase with HSAs. This list includes products like allergy medication, pain relievers, prenatal vitamins, and tampons. See the full list of eligible HSA expenses here.

HSAs can be a great addition for both tax advantages and saving for future medical needs. Consider this option when selecting your health insurance if tax deductions are meaningful to you or if you have many medical bills on the horizon. If you’re not sure or need help sorting through your options, we’re happy to help - get in touch today!