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 are the most common momentum oscillators used in options trading?

    Read about some of the most common technical momentum oscillators that options traders use, and learn why momentum is a critical ...
  2. Who are the best-rated life insurance companies in the US?

    Learn about what makes an insurance company the best. Read about the best life insurance companies in the U.S. in 2014, following ...
  3. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ...
  4. How are Bollinger Bands® used in options trading?

    Use Bollinger Bands to identify volatility changes and place options trades at the right time; profit in bull or bear markets ...
RELATED TERMS
  1. Medical Identity Theft

    Stealing another person’s health insurance information so that ...
  2. Noncancellable Insurance Policy

    A life or disability insurance policy that an insurance company ...
  3. Member Month

    The number of individuals participating in an insurance plan ...
  4. Pre-Existing Condition Exclusion Period

    A health insurance benefit provision that places limits on benefits ...
  5. Policy Or Sales Illustration

    An educational tool that shows a prospective or new insurance ...
  6. Point-of-Service Plan (POS)

    A type of managed-care health insurance plan that provides different ...

You May Also Like

Related Articles
  1. Thanks to the Affordable Care Act, you can no longer be denied health insurance for having a pre-existing or chronic medical condition.
    Insurance

    Choosing A Health Plan For Your Chronic ...

  2. Four key factors to check out before you just sign up for dental insurance. The coverage could be really worth it – or not.
    Insurance

    Does That Dental Insurance Have Cavities?

  3. Compared to other options, does it ever make sense to include cash-value life insurance in your investment portfolio?
    Trading Strategies

    How Good An Investment Is Life Insurance?

  4. Insurance

    Tips for Finding Affordable Health Insurance

  5. Insurance

    4 Steps to Finding the Right Health ...

Trading Center