Health savings accounts are tax-preferred. Unlike Roth IRAs and 401Ks, health savings accounts offer tax savings in three ways.
You will not pay taxes on the money contributed to the account.
You will not pay taxes when you earn interest or other gains, such as investment earnings.
And you will not pay taxes when you spend the money for qualified medical expenses.
In fact, as long as you spend the money for qualified medical expenses, you will never pay taxes on these funds.
To be eligible to open a health savings account, you must meet certain requirements.
You must be enrolled in a qualified high deductible health plan.
You cannot be claimed as a dependent on someone else’s tax return.
You cannot be covered by any other health plan that is not a qualified high deductible health plan. For example, if your spouse has a different type of health insurance plan, you cannot be covered by that plan in addition to your own health plan. However, you can have dental and vision coverage and still open a health savings account.
You cannot be enrolled in a Medicare or Medicaid health plan. If you are enrolled in one of these plans and already have an existing health savings account, you can use the existing money. But you cannot contribute more money.
You cannot be enrolled in a flexible spending account, or FSA. There is one exception to this rule: You can be enrolled in a “limited purpose” FSA that can only be used for dental, vision, and preventive care.
There are no income limits that apply to having a health savings account.
Intro to CDH
Health Insurance Basics
High Deductible Health Plans
Health Savings Accounts
How HSAs Work
Health Reimbursement Arrangements