Should I start a health savings account?
An overview of HSAs
High-deductible health insurance plans are some of the most popular and fastest growing type of insurance plan offered on and off the marketplace. According to the American Journal of Managed Care, 85 percent of marketplace consumers chose high-deductible plans in 2014, and this year the number may be even higher.
If you recently chose a high-deductible plan for your 2016 coverage, you may have some questions about health savings accounts, which are often paired with high-deductible plans to help consumers pay for medical costs. Here are four frequently asked questions about HSAs:
What is an HSA?
A health savings account (HSA) is a tax-advantaged medical savings account. Any money you put into an HSA is not subject to federal income taxes, and the funds accrue interest and roll over at the end of the year.
The money in an HSA can be used tax-free for qualified medical expenses at any time. Click here for a list of qualified medical expenses.
Who can start an HSA?
Only people who are enrolled in qualified high-deductible health plan. A HDHP is a health insurance plan with lower premiums and higher deductibles than a traditional health plan.
A qualified high-deductible health plan must have:
A minimum deductible amount of $1,300 for a single person and $2,600 for a family
A maximum out-of-pocket amount of $6,450 for a single person and $12,900 for a family
For more on contributions, check out “Health savings account: How much should I contribute?”
What are the contribution limits and deadlines?
In 2016, a single person can contribute $3,350 per year, and a family can contribute $6,750 per year.
Contributions can be made until the tax filing deadline for a specific year. For example, 2015 contributions must be made before April 15, 2016.
Where can I start an HSA?
HSAs are offered by both local and national banks and credit unions, as well as non-bank health savings trustees. Some have fees, and some are only savings accounts while others feature investment options.
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