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 is a volatility smile?

    Discover what options traders mean when they refer to a "volatility smile," and learn why a volatility smile's existence ...
  2. What are some examples of common fringe benefits?

    Learn how offering fringe benefits can be a strategic recruitment and retention tool for employers and drastically increase ...
  3. Is short selling ethical?

    Understand the concept and practice of short selling, and examine the ethical questions that some investors raise in regard ...
  4. What kinds of restrictions does the SEC put on short selling?

    Learn about the rules and regulations on short selling enforced by the U.S. Securities and Exchange Commission, or SEC, including ...
RELATED TERMS
  1. Bare Walls Coverage

    A type of insurance coverage that applies to communally used ...
  2. Contents Rate

    The premium required to insure the contents of a property rather ...
  3. Borderline Risk (Insurance)

    An insurance policy applicant that an insurance company has not ...
  4. Canine Liability Exclusion

    A homeowners policy endorsement that prevents the insurer from ...
  5. Building Ordinance Coverage

    Insurance that covers the increased cost of repairing a damaged ...
  6. Balance Billing

    When a health care provider bills a patient for the difference ...

You May Also Like

Related Articles
  1. Options & Futures

    Options -- Accessing Stakes In Apple ...

  2. Insurance

    Finding The Best Health Insurance You ...

  3. Insurance

    Avoid The No-Health-Insurance Penalty ...

  4. Options & Futures

    These Are The Top Brokerage Firms For ...

  5. Insurance

    Rating Assurant Prepaid Vs. Delta PPO ...

Trading Center