What are the requirements to be able to contribute to an HSA?

By Steven Merkel AAA
A:

Health Savings Accounts (HSA) can be used by individuals covered by a high-deductible health plan to save for health care costs on a tax-free basis, in an account that is similar to that of an individual retirement account (IRA).The HSA provides for a tax-sheltered account that can be used for paying routine medical expenses. In order to contribute, you may not be enrolled in Medicare part A or B, and you must not be a dependent of another taxpayer.

Deposits to this type of account can either be made on an individual basis or through an employer; despite the method of depost, health insurance premiums are lower for those contributing into an HSA. Contributions to an HSA plan may also be federally tax-deductible, depending on your filing situation.

Distributions from an HSA used exclusively to pay or reimburse qualified medical expenses of the account owner, his or her spouse, or dependents are not taxable. Distributions used for anything other than qualified medical expenses are taxable and subject to a 10% penalty. The penalty does not apply for distributions due to disability, reaching age 65, or death. Although customer satisfaction polls have varied, many HSA customers prefer such a system over traditional health benefit plans. (Having trouble sorting through your prescription drug coverage options? check out Getting Through The Medicare Part D Maze.)

The question was answered by Steven Merkel

RELATED FAQS

  1. What's the difference between binary options and day trading?

    Binary options and day trading are both ways to make (or lose) money in the financial markets, but they are different animals. ...
  2. If a LEAP option is purchased and held for more than 12 months, is the tax treatment ...

    A LEAP (long-term equity anticipation security) is a call or put option that allows the buyer a long-term expiration on the ...
  3. Can my insurance company refuse me coverage?

    Insurance isn't always as straightforward as other products. Insurers can deny coverage in many different instances:Non-Renewal ...
  4. How old should you be to get life insurance?

    There's really no pre-determined age when it suddenly becomes necessary to take out a life insurance policy. However, if ...
RELATED TERMS
  1. Convertible Insurance

    A type of life insurance that allows the policyholder to change ...
  2. Guaranteed Issue Rights

    A right afforded to individuals insured under Medicare that requires ...
  3. Lifetime Reserve Days

    The number of hospital days that an insurance policy will cover ...
  4. Hurricane Deductible

    An amount a homeowner must pay before insurance will cover the ...
  5. Usual, Customary and Reasonable Fees

    Out-of-pocket fees that an insurance policy holder must pay for ...
  6. Reinsurer

    A company that provides financial protection to insurance companies. ...
comments powered by Disqus
Related Articles
  1. Is Retirement Good For You Or Bad For ...
    Retirement

    Is Retirement Good For You Or Bad For ...

  2. Ebola's Economic Impacts on Liberia, ...
    Economics

    Ebola's Economic Impacts on Liberia, ...

  3. The Top Technical Indicators For Options ...
    Options & Futures

    The Top Technical Indicators For Options ...

  4. How the Affordable Care Act Changed ...
    Insurance

    How the Affordable Care Act Changed ...

  5. How To Buy Oil Options
    Options & Futures

    How To Buy Oil Options

Trading Center