Benefits Of A Health Savings Account

The health savings account is a fairly new way to save money on taxes, but it's a good one. When unexpected medical bills come up, people can save a lot of money if they know how to use this new option and what its benefits are.

Health savings account plans usually come in two main types: those that are offered by an employer and those that are bought on your own. Since the rules for employer-sponsored plans might be different from one company to the next, we'll focus on the ones that might help people who buy their own health insurance.

In a nutshell, these savings plans let people save money without having to pay taxes on it. The money can be used for qualified medical expenses and medical expenses in retirement. People must have High Deductible Health Plans, which means they pay a deductible of at least $1,000 for coverage for themselves. Most insurance companies will now tell their customers if the plan they choose gives them this option.

There are many good things about the health savings account. Among them are:

1. The money keeps going. Some health savings accounts set up and paid for by employers don't let you roll over money from year to year. But a self-opened account does. The money put into the account doesn't count as income unless it's used for something that isn't allowed.
2. Simple to open. People can set up their own health savings accounts at most banks, credit unions, insurance companies with high deductible plans, and other places. The only thing that's needed is the right kind of health insurance. Opening one of these plans shouldn't cost anything.
3. Helps people save money faster for expenses. Since you don't have to pay income tax on these accounts, the money you save can help you have more cash when you really need it.
4. The person who opens a health savings account owns the money in it. It's up to the person to decide how to spend that money, but the tax benefit will be lost if it's used for things other than medical costs.
5. Simple to use. Most HSAs come with a debit card that can be used to pay for medical expenses that qualify.

When it comes to the small details of what expenses are allowed and what aren't, these plans can be hard to understand. There is a lot of specific information on qualified expenses from the federal government, but you can also make some generalisations. Most of the time, things like these are on the qualified list:

1. Insurance premiums. This is allowed for COBRA insurance payments and for people who are out of work.
2. Care for your teeth and eyes. Most of the time, dental and eye care costs that aren't for cosmetic reasons are fair game.
3. Co-payments. Co-payments can sometimes be taken out of a health savings account.
4. Drugs that need a prescription. Over-the-counter medicines and medical supplies are also usually considered eligible expenses.

A health savings account can be a great way to save money for medical costs without having to pay income tax on it. As long as the money in these accounts is used for qualified medical costs, the savings will continue even after the money is used.