Health saving account (HSA) is a type of savings account in which the money is typically used for healthcare expenses for taxpayers in the United States. The law specifying HAS was signed by President George W. Bush on December 8, 2003 and went into effect on January 1, 2004. One of the biggest advantages of HAS is that the money deposited in it is not taxed as long as it is for qualified medical expenses such as deductible and coinsurance, thus the overall health care costs can be lowered. Money spent for non-medical expenses will incur penalties.
If you want to be qualified for an HSA, the following requirements must be followed:
- You must have a High Deductible Health Plan (HDHP), any plan with a deductible of at least $1,350 for an individual or $2,700 for a family.
- You have no other health coverage except what is permitted under health coverage specified.
- You aren’t enrolled in Medicare.
- You are claimed as a dependent on someone else’s tax return.
Just like other medical savings accounts such as medical savings account (MSA), HSA can be used with some high-deductible health plans. But it is also different from medical savings accounts in that all employers are allowed to offer a health savings account and insurance plan to employees.
If the account holders want to withdraw money from HSA, they do not have to ask for approval from anyone in advance. If the account holder is deceased, the money in their account can be transferred to their surviving spouse without any tax.